Trading Bitcoin Futures on the CBOE

December 8, 2017 rcm-alternatives 0 comment  Like
Managed Futures, Markets

Bitcoin Futures:  CBOE style

Ready or not, Bitcoin Futures is about to happen. This Sunday, December 10th, at 5:00pm the Bitcoin Futures will start trading on the CBOE, beating the CME by a couple days. We’ve covered CME’s bitcoin contract specs and how much money is going to be required to trade, and here’s the details on the CBOE contract.

Ticker:

XBT

Underlying Index:  Cboe’s contract will be priced off the auction prices of bitcoin in U.S. dollars on the Gemini cryptocurrency exchange.

Contract and Tick Size:

Per the CBOE website, the contract will be for 1 Bitcoin (vs 5 at CME), with the minimum tick interval at 10 points (vs 5 at the CME). Put that all together and a tick move is worth $10 (compared to $25 with the CME contract).

Expirations:

Looks like monthly (or as the exchanges say in obfuscating language – three serial months and three months on the March quarterly cycle), with the possibility of weeklies at some point.

Pricing Limit:

The market will halt trading in the futures at two separate price fluctuations: 10% and 20%. When the market is up or down 10% from the previous day’s close, trading will be halted for two minutes; when the prices move by 20%, trading will be halted for five minutes.

This will be interesting because on Friday (today) Bitcoin dropped roughly 3,000 dollars or roughly 18%.  As Motley Fool points out, Bitcoin experiences these kinds of fluctuations more often than not.

Using data from CoinMarketCap.com going back to May 2013, I find that roughly once every two weeks, on average, bitcoin had a day where its daily high or low was 10% higher or lower than its price at market open.

Enter Bitcoin futures giving traders the ability to short the market, and we could be experiencing a halt in trading every week or maybe every day.

Margin:

The CBOE is showing margin will be placed at 30% (vs 35% at CME)

Implications of Bitcoin Futures

Will Bitcoin Futures volume explode Sunday evening? Or will speculators stick with actual Bitcoin?  Or wait til the CME contract launch?

It’s rare for a new futures contract to see immediate success. It’s usually all about fits and starts and volume and liquidity coming in slowly over months/years in a complex dance of liquidity providers, market makers, speculators, and hedgers.  But this is Bitcoin we’re talking about, where the old rules and record books get thrown out the window daily. One thing is for certain, innovation and competition are alive and well at Chicago’s futures exchanges.  We know of at least one group that will be getting involved very shortly.

See you all on Sunday night!

Disclaimer
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