Bitcoin futures and options

Bitcoin Futures Settlements, Calendar Spread, and Options

Chicago Mercantile Exchange’s (CME) is a diverse derivatives marketplace offering a wide range of futures and options products for risk management.

For institutional investors seeking exposure to bitcoin price movements without holding any actual bitcoin, CME offers the regulated, cash-settled, bitcoin futures trading products — only available in the United States.

In 2016, CME and Crypto Facilities launched two bitcoin pricing products:

• Bitcoin Real Time Index (BRTI)
• Bitcoin Reference Rate (BRR)

The BRTI and BRR both enhance market participants’ risk management of digital assets and accelerate the professional adoption of bitcoin trading.

Bitcoin Real Time Index (BRTI)

BRTI is a real-time index of the U.S. dollar price of one bitcoin, published once per second, 24 hours a day, 365 days per year. This index provides real time transparency to the U.S. dollar price of bitcoin.

Bitcoin Reference Rate (BRR)

BRR is a daily reference rate of the U.S. dollar price of one bitcoin as of 4 p.m. Greenwich Mean Time.

Each day, the BRR aggregates the trade flow of major bitcoin spot exchanges during a specific one-hour calculation window. This one-hour window is then partitioned into 12, five-minute intervals, where the BRR is calculated as the equally-weighted average of the volume-weighted medians of all 12 partitions.

Oversight of the CME CF Bitcoin Pricing Products

The independent oversight committee is responsible for overseeing the scope of the Bitcoin Reference Rate by developing a code of conduct for the participants and regularly reviewing the practice, standards and definition of the reference rate to ensure it remains relevant and retains its integrity.

Bitcoin Futures Settlements

The vast majority of futures trades made by speculators are offset before final expiration. Some traders might allow their positions to expire; and in the case of bitcoin futures, would expire to cash settlement according to the Bitcoin Reference Rate (BRR).

However, a small group of investors, mainly institutions such as pension funds, endowments and money managers, might wish to extend their positions beyond the contract expiration.

The strategy that allows them to extend a futures contract from one expiration to the next is referred to as rolling the futures contract (or rolling forward). The transaction that effects this strategy is called a calendar spread.

Calendar Spreads

A calendar spread allows a trader to exit the expiring contract and into a deferred contract in a single trade. By doing a calendar spread, a trader’s bitcoin futures position can be extended by one month or more depending on which deferred contract he rolls into.

Bitcoin Calendar Spread Convention

Contracts expire the last Friday of the month, and are listed on the nearest two months in the quarterly cycle plus the nearest two months not in the quarterly cycle.

Certain futures contract spreads carry different quoting conventions; stock index futures and treasury futures have completely opposite conventions for buying and selling calendar spreads during the roll process.

Bitcoin futures follow the same convention as stock index futures, in that buying the spread means buying the deferred contract and selling the nearby.

CME Bitcoin Options Planning Launch Jan. 13, 2020

CME Group staff determines the daily settlements for the out of the money options based on market activity throughout the day, on all venues (including, but not limited to, CME Globex, CME ClearPort, CME Direct and the trading floor, as applicable).

In response to growing interest in cryptocurrencies and customer demand for tools to manage bitcoin exposure, CME Group plans to launch options on Bitcoin futures (BTC) on January 13, 2020.

CME Bitcoin futures provide an efficient tool to access the bitcoin market and hedge any direct exposure to bitcoin pricing. In response to customer demand for additional bitcoin trading tools, CME Group is listing options on Bitcoin futures.

CME options on bitcoin futures settle into 1 bitcoin futures contract upon termination of trading. As you know, the CME Bitcoin futures contract represents five bitcoin and cash settles to the CME CF Bitcoin Reference Rate (BRR).

Therefore, an option on Bitcoin futures provides that same exposure to five bitcoin. Options on Bitcoin futures will mirror the underlying Bitcoin futures listing cycle and will be quoted in US dollars per one bitcoin.

Prices of options with a December expiration will follow the December futures and prices of options with a January expiration will follow the January futures contract.

Bitcoin Options on Futures Contracts Specs

The minimum price fluctuation, or tick increment, for options on Bitcoin futures will depend on the options cost, or premium, which can be affected by several factors — including the price of the underlying futures, volatility, interest rates, and time to maturity — to mention a few.

The minimum tick is generally five points — equal to $25 per option. If the option is priced at or below 25, the minimum tick is reduced to one point — equal to $5.

The strike intervals of options on Bitcoin futures will encompass a wide range and will be dynamically generated every night.

Options on Bitcoin futures will expire the same day as the underlying Bitcoin futures contract expires, which is the last Friday of the contract month.

These options are European style — which means they can be exercised only at expiration and therefore option sellers cannot be assigned prior to expiration.

However, a position could be closed prior to expiration by trading out of the position. Please be aware that trading terminates at 4:00 p.m. London time on the last Friday of the contract month.

CME options on Bitcoin futures will trade on an established regulated exchange and are centrally cleared through CME Clearing — therefore eliminating counterparty — or claw back risk.

They will be available to trade on CME Globex, Sunday afternoon through Friday afternoon, nearly 24 hours per day and are block trade eligible

Bitcoin futures and options are margined as a portfolio, providing greater capital efficiency. There you have it, options on Bitcoin futures, another option to manage bitcoin risk or speculate on th price of bitcoin.

Conclusion

As you may be aware, spot bitcoin pays no dividends or interest. Moreover, while spot bitcoin is, for all intents and purposes, nearly impossible to sell short, it is relatively easy to sell short Bitcoin futures contracts. Given that no wallet risk exists with futures; you do not need a wallet when you trade futures but do when you buy bitcoin on the spot market.

These factors will influence how futures in deferred calendar months will be priced. In a surging bull run, it’s likely the spread will become more positive. In a severe bear market environment, the spreads could go negative and deferred contracts could become much cheaper than nearby.

Given that Bitcoin futures are new a carry relatively high volatility, it behooves investors large and small to be aware of these nuances.

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How to Trade Bitcoin Futures & Options? Derivatives Exchange

Bitcoin Derivatives are tradable securities or contracts which derive their value from underlying assets (Bitcoin spot rate). Bitcoin Future and Options are now among the most common financial products on any cryptocurrency exchange or trading platform, thanks to increased interest among the crypto trading community. Various Bitcoin derivatives products include Swaps, Futures, Forwards, Options, and Perpetual Futures.

Trading crypto derivatives has its advantages as it allows users to mitigate volatility-associated risks and hedge against potential losses.

How to trade Bitcoin Futures & Options

Step 1) Register a free Binance account.

Next, click open now to activate your trading account.

Step 2) Choose a contract you want to trade.

Step 3) Adjust the position mode.

And select hedge mode and set leverage multiplier.

Step 4) Transfer asset into the future account

If you want to transfer used to spot, you can transfer using Binance. You can also transfer to a coin margin account if you want to trade coin margin.

Step 5) Open a position,

You can see binance support various order types like limit, market, and stop limit.

Step 6) Monitor your position.

All your positions are given bottom of the screen; you can check them.

Step 7) Close your position.

You can do this by selecting the limit close or market-close option. You need to select a one-way mode.

Step 8) Under the hedging mode

1) You need to select the close tab.

After this step, you are all set for trading.

Bitcoin F&O Guide:

❓ What are the types of Bitcoin derivatives?

There are mainly four types of Bitcoin derivatives:

Perpetual contracts:

These contracts are a clone of crypto futures contracts. Traders can hold a position as long as they have enough funds. Perpetual contracts are more suitable than futures trading for the people who needs to invest after every hour to keep the position open. Perpetual contracts help you combine the intuitiveness of spot trading with the futures market’s risk hedging.
Options:

By integrating options into your derivatives trading exchange allows traders to buy or sell an underlying asset at the pre-determined strike price in the specific timeline. They may take a call or a put option. In options (buying), traders are under no obligation to exercise the option as in the case of futures. They simply have an option at hand.
Swaps:

Traders use swaps to exchange one type of crypto derivate with another. This helps them to earn profit at a fixed time later.
Forwards:

Forwards is nothing but resembles futures, however, with a difference. Forwards can be customized, unlike futures. Forwards are generally traded through OTC (over the counter), so you need to consider the associated risks.

👉 Can you explain bitcoin future and options in simple terms?

Let’s learn this with the help of the following example.

• Imagine you want to speculate on the price of gold. You could go and physically purchase bars of gold and sell them when prices have moved up.
• However, that is almost impractical and costly as you would also need to consider storage and transportation fees. Here better approach would be to trade an instrument or contract whose price is indexed to that of gold instead.
• These contracts are agreements that help you sign with an opposing party. It also helps you imagine that you are assuming the price will go up while another person believes the price will go down.
• You and another speculator can sign an agreement declaring that after a certain period when the price has moved in any direction, one party needs to pay the other the price difference.
• For example, the price of BTC is at $1000, and you assume that it will rise. Your counterparty bets it will go down. However, the price moves to $11,00 by the time you require to settle the contract. The opposing trader will pay you the difference of $1,00 only.
• Assume the opposite happens, and the price goes down to $900; you will have to pay $1,00. As you can see in such a deal or contract, an investor or trader can profit even when prices go down without having to own the underlying asset.
• Though this is how derivatives work in the context of trading, it comes with many unique variations in reality. The widely popular derivatives in the cryptocurrency industry are futures & settlement options and perpetual contracts.

⚡ Can beginners use derivative exchanges?

Yes, certainly, beginners can use derivative exchanges. Still, it is better to get some experience with easier trades before moving on to derivatives.

❗ Can I exchange futures for swaps?

Yes, you can exchange futures for swaps on specific platforms.

🏅 What should you look for before joining crypto derivatives exchanges?

It is important to search for the best crypto derivative exchange before you start trading.

Here are some important steps you need to check before selecting a crypto derivate exchange.

• Reputation: The best way to find out about an exchange is to search using various reviews from individual users and with the help of well-known industry websites.
• Trading Fees: Many crypto derivate exchanges should have fee-related information on their websites. Therefore, before joining, you need to make sure you understand deposit, transaction, and withdrawal fees. Trading fees might differ upon the exchange you use.
• Payment Methods: You need to find out what payment methods are available on the exchange? Are they accepting Credit cards or Debit cards? Can you trade with USD, EUR, etc.
• All these details are important as if it has limited payment options, which may not be convenient for you to use them. You need to remember that buying cryptocurrencies with a credit card always demands identity verification. It also costs you a premium price.
• There is a bigger risk of fraud and higher transaction and processing fees. Buying cryptocurrency using wire transfer will take significantly longer as it takes time for banks to process.
• Verification Requirements: The majority of Bitcoin trading exchanges require ID verification to make deposits and withdrawals. However, some trading exchanges also allow you to remain anonymous.
• Most of them ask for verification, which may take some time. It helps you to protect the exchange against all kinds of scams and money laundering.
• Geographical Restrictions: Some functions offered by cryptocurrency exchanges are only accessible from specific countries. You should also make sure the crypto derivatives exchange you want to join provide full access to all platforms and functions in the country you are currently in.
• Exchange Rate–Various exchanges have different rates. So you need to search derivate exchange which provides an exchange. You will be surprised how much you can profit if you use the exchange. It is common for rates to fluctuate up to 10% and even higher in some instances.
• Support & Tutorials: Many crypto traders have developed training modules, videos, and blogs to educate their users. If you are new to trading, you can go through such a source to get a better idea of the tool. This will also help you to save valuable time while trading currency.
• Crypto Tax Software Integrations: It is easy to rack up your high number of trades when you trade with crypto bots. If you do not have the right software, reporting your crypto profit and loss on your taxes is challenging. It is crucial to look at the crypto tax software companies compatible with your desired Crypto trading bot platform. Having good crypto tax software that supports your crypto trading strategy can make your tax reporting easy.

⭐ What is the difference between a broker and a cryptocurrency exchange?

At cryptocurrency exchanges, you buy the crypto coins and own them outright. In contrast, cryptocurrency brokers act as a mediator for you to speculate on crypto assets’ price movements.

On the other hand, Crypto brokers tend to undergo stricter regulation and scrutiny. They also offer FIAT trading products and derivatives, while cryptocurrency exchanges are still in a regulatory gray zone.

⚡ What are Crypto Trading Bots?

Crypto trading bots are automated software that helps you to buy and sell cryptocurrencies at the correct time. The main goal of this software is to increase profits and reduce losses and risks. These applications enable you to manage all crypto exchange accounts in one place. Many such programs allow you to trade for Ethereum, Litecoin, Bitcoin (BTC), and more with ease.

❓ What is a Cryptocurrency exchange?

A Cryptocurrency exchange is also called Digital Currency Exchange (DCU). It is a business that enables you to trade digital currencies or cryptocurrencies. Many cryptocurrency exchanges offer to trade Bitcoins, Ethereum, XRP (Ripple), Coinbase, Altcoin, etc.

Best Crypto Derivatives Exchanges: Trade Bitcoin Future and Options

Crypto derivative exchanges offer dashboards for trading history, recent trades, and order books. Here is a list of the Top Bitcoin Derivative Exchanges. This list consists of paid and open-source tools with popular features and the latest download links.

Name	Binance	Deribit	Bybit
Supported Coins	30+ cryptocurrencies	BTC or ETH	Bitcoin, Ethereum, Ripple, EOS.
Fee	Taker fee is 0.075%, maker fee is 0.025%.	Maker-.02% Taker: .05%. Options.04%.	0.075% taker fee, 0.025% rebate for makers.
Leverage	Up to 125x	Up to 100x	Up to 100x.
Withdrawal	Under 30 minutes	Take up to 3 days.	Processed 3 times a day.
Daily Turnover	4 Billion	1 billion	700 Million
Support options	Live Chat & Email	Telegram and Email	Live Chat & Email
Deposits	Bank Deposit, Credit/Debit Card: Visa and Mastercard. P2P Trading	Crypto Only	Cryptocurrency
Mobile Apps	iOS, Android	iOS, Android	iOS, Android
Geo Restrictions	Not allowed for USA.	Not allowed in USA.	Worldwide, except United Kingdom, USA, Australia, Europe, Netherlands, Finland, Sweden, Denmark, and Norway.
Verification	Address and identity verification.	Address verification.	No KYC verification need.
Link	Learn More	Learn More	Learn More

1) Binance

Binance is one of the best crypto derivate exchanges. It offers a platform for trading more than 150 cryptocurrencies. This online exchange has an API to integrate your current trading application.

Features:

• It is one of the top cryptocurrency exchanges that provide 24/7 support.
• This application offers a wide range of tools for bitcoin options trading online.
• It has a P2P exchange, spot, and futures.
• Offers both basic and advanced exchange interfaces for trading.

Key Statistics:

Supported Coins for derivatives: 30+ cryptocurrencies.

Fees: Standard taker fee is 0.075%, and the standard maker fee is 0.025%

Leverage: Up to 125x

Withdrawal: Under 30 minutes

Daily Turnover: 4 Billion

Support: Live Chat & Email

Deposit: Bank Deposit, Credit/Debit Card: Visa or Mastercard, and P2P Trading.

Mobile Apps: iOS, Android.

Geo Restriction: Not allowed for USA

Verification: Government ID card and address verification for KYC.

2) Deribit

Deribit is a great exchange for crypto futures and options trading. It comes with a no-fee deposit and free withdrawals. It allows buying and selling of Bitcoin futures and settlement options.

Features:

• Low trading fees
• It offers dashboards for trading history, recent trades, and order books.
• Allows test exchange to get training in crypto bitcoin derivatives.
• It has statistics for futures, index, volatility, and technical indicators.

Key Statistics:

Supported Coins for derivatives: BTC or ETH.

Fees: Maker: -.02% Taker: .05%. Options.04%.

Leverage: 100x leverage

Withdrawal: Take up to 3 days.

Support: Telegram and Email

Deposit: Crypto Only

Mobile Apps: iOS, Android.

Geo Restriction: Not allowed inUSA.

Verification: Need documents that reflect the country of residence.

3) Bybit

Bybit’s advanced trading system is ever-reliable with No Overloads and a 99.99% availability track record since inception. It offers an advanced order system where traders can set TP/SL for entry orders.

Features:

• Advanced mark and index pricing system provides the most reliable prices.
• Variety of platform data shown in real time to remain transparent to the users.
• Encrypted and secure platform.

Key Statistics:

Supported Coins for derivatives: Bitcoin, Ethereum, Ripple, EOS.

Fees: 0.075% taker fee, 0.025% rebate for makers.

Leverage: Up to 100x.

Withdrawal: Processed 3 times a day.

Daily Turnover: 700 Million.

Support: Live Chat & Email

Deposit: Cryptocurrency

Mobile Apps: iOS, Android.

Geo Restriction: Worldwide, except United Kingdom, USA, Australia, Europe, Netherlands, Finland, Sweden, Denmark, and Norway.

Verification: No KYC verification is needed. Enter your phone number or email address, then verify your number or email address.

4) BitMEX

BitMEX is one of the best cryptocurrency exchanges and platforms. This web-based crypto derivative application offers a comprehensive API that helps investors to access financial markets using Bitcoin.

Features:

• This application constantly audits the balance and history of all accounts.
• It provides multi-factor security inside-out.
• Bitmex keeps all funds in cold storage for security.
• The perpetual contract of BitMex may trade at a significant premium or discounted rate to the Market Price.

Key Statistics:

Supported Coins for derivatives: Bitcoin, Ethereum, Litcoin, Cardano, EOS, Ripple, etc.

Fees: Maker.025% and Taker:.075%.

Leverage: up to 100x

Withdrawal: Linked up to your withdrawal wallet address to your Bybit account

Support: Mail only

Deposit: Crypto Only

Mobile Apps: No

Geo Restriction: Not allowed in Hong Kong, Bermuda, and Seychelles.

Verification: Not needed

5) OkEx

OKEx is a cryptocurrency exchange that provides advanced financial services to traders globally by using blockchain technology. This crypto exchange offers hundreds of tokens to help traders to optimize their crypto derivative strategies.

Features:

• OKEx provides a safe, reliable, and stable environment for digital asset trading via the web interface.
• Increases the efficiency of transactions across society.
• The support team provides a fast resolution to your query.
• It helps you to trade cryptos instantly and at a low price.
• You can join the conversations on OKEx worldwide communities.

Key Statistics:

Supported Coins for derivatives: Bitcoin (BTC), Ether (ETH), and Litecoin (LTC).

Fees: Standard taker fee is 0.075%, and the standard maker fee is 0.025%

Leverage: 1-100x.

Withdrawal: Only crypto

Support: Live Chat, Ticket, and Email.

Deposit: Token trading.

Mobile Apps: iOS, Android.

Geo Restriction: Not allowed in Bangladesh, Bolivia.

Verification: No verification is required to trade.

6) Kraken

Kraken is one of the most trusted crypto derivatives exchange companies. It offers financial stability by maintaining full reserves, relationships, and the highest legal compliance standards.

Features:

• It offers a highly comprehensive security approach.
• Allows you to buy and sell assets in a single click.
• Kraken automatically checks all addresses for errors.
• One of the most trusted crypto derivatives exchange

Key Statistics:

Supported Coins for derivatives: XBT, ETH, LTC, BCH, and XRP

Fees: 0.02% maker fee and 0.05% taker fee

Leverage: Up to 50x

Withdrawal: Transfer funds to your Futures Holding wallet

Support: 24/7 live chat

Mobile Apps: iOS, Android.

Geo Restriction: Not allowed in Afghanistan, Congo-Brazzaville, Congo-Kinshasa, Cuba, Iran, Iraq, Libya, and North Korea.

Verification: Need documents that reflect the country of residence

7) FTX

FTX is a younger crypto derivatives exchange platform that has quickly captured retail and institutional traders’ attention. It offers a wide variety of spot market pairs and derivatives, as well as betting markets.

Features:

• It offers to tokenize stocks.
• FTX offers perpetual contracts and future exchanges for almost every major bitcoins.
• Does not have any withdrawal fees.
• FTX also creates leveraged tokens that work like leveraged ETFs.

Key Statistics:

Supported Coins for derivatives:BTC, ETH, FTT, BNB, UNI, LTC, etc

Fees: Standard taker fee is 0.075%, and the standard maker fee is 0.025%

Leverage: Up to 125x

Withdrawal: Under 30 minutes

Daily Turnover: 4 Billion

Support: Via Email and Telegram.

Mobile Apps: iOS, Android.

Geo Restriction: Not allowed in United States of America, Cuba, Crimea and Sevastopol, Iran, Syria, North Korea, or Antigua and Barbuda.

Verification: KYC required

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