How to trade futures on bitcoin
When discussing ways to invest in bitcoin, I mentioned bitcoin futures contracts. With these, you could essentially bet on the market and what the price of bitcoin will be in the future. These. Jan 30, · Like with stock trading, Bitcoin trading is typically conducted by matching buy and sell orders. These orders enter the order book and are removed once the exchange transaction is complete. The margin required for CME Bitcoin futures trading is not yet determined. CME says, “As of November 1, the estimate of initial margin that CME Clearing would require is %, though this is subject to change.” The minimum margin will probably be around half that. How to trade Bitcoin futures on CME.
How to trade futures on bitcoinHow to Buy, Sell and Trade Bitcoin
Services Home. Uncleared margin rules. Understand how CME Group can help you navigate new initial margin regulatory and reporting requirements. Calculate margin. Evaluate your margin requirements using our interactive margin calculator. Education Home. Now live: ESG solutions. Manage the risk associated with renewable energies, environmental change and sustainable investments. Create a CMEGroup. Get quick access to premium educational content, including expert-led webinars, a real-time trading simulator, and more.
Bitcoin futures and options on futures. Now trading: Bitcoin options on futures. Key benefits. Easily trade on your market view. Efficient price discovery in transparent futures markets. Subscribe for updates on Bitcoin futures and options. Are you new to futures markets? You're in the right place. Learn more about what futures are, how they trade and how you can get started trading. Why Trade Futures. And if you expect Bitcoin prices to go up, you are interested in buying call options — options that enable you to buy Bitcoin at a predetermined price in the future.
For example, if the current Bitcoin price is 5, USD and you expect it to rise to 8, USD 6 months from now, you would certainly pay good money for a call option that allows you to purchase Bitcoin for USD in 6 months, when everyone else is buying for 8, USD. Buying put options will enable you to sell Bitcoin at some point in the future at a price that is higher than the future price you expect.
In analogy to the example above, if the current Bitcoin price is 5, USD and you expect it to fall to 2, USD in 6 months, then put options allowing you to sell Bitcoin for 5, USD in 5 months when everyone else is selling for USD are very valuable.
In both of these examples, the options call option in the first example, put option in the second have an intrinsic value of 3, USD. Going long is fairly straightforward. It is similar to buying the underlying asset itself, with the only difference being that it enables you to have more leverage. Both call and put options have, as we have learned above, a certain expiration date. For example, my call option Bitcoin for 5, USD that I am buying on November 24, , may have a running time of 6 months and thus expire on May 24, I can sell this option at any time between now and May 24, Then my option is very valuable because it enables me to purchase Bitcoin significantly cheaper than the current market price.
However, if the price of the underlying asset is going down, your options usually become worthless before the expiration date. Everything discussed above is true for put options as well, except that their value development goes in the opposite direction.
They become more valuable as the underlying asset price is falling. A futures contract, as we have mentioned above, is a contract between two parties who agree to make a transaction of an underlying asset at a specified time in the future. You enter into this contract on an exchange like CME. Now, what if the Bitcoin price is rising? In order to still make things fair for both participants, the exchange here CME will make sure that you can sell for the current market price of 5, USD if you so wish, but they will compensate your contract partner for this.
They will take the difference — USD — out of your so-called margin account and give it to Mortimer. This kind of settlement is not only performed on the fulfilment date of the futures contract, but on every trading day, according to the current price of the asset. In order to make sure that you actually have money in your margin account to settle the difference with Mortimer every day, you are required to put up an initial margin at the beginning of the contract.
A lower sum, the so-called minimum margin or maintenance margin , is also defined by the broker. If the money in your margin account falls from the initial margin to the maintenance margin, it triggers a margin call : The broker requests you to fill up your margin account to at least the initial margin of course, you may also put up more.
This is why margin calls should be avoided. The margin required for CME Bitcoin futures trading is not yet determined. If you want to join in on the fun, how should you proceed? Trading directly on CME is not possible unless you are a broker yourself. As an individual investor, you need to find a broker who trades on CME.
You will then open an account with this broker — a margin account rather than a cash account because in options trading, there is a margin involved, as we have seen above. As of this articles publication Nov. We expect that more of them will adopt this specialty as soon as Bitcoin futures are on the market. In this article, we have covered the basics of Bitcoin futures trading. However, this is just a small part of everything you need to know to become a well-rounded, successful crypto trader.
Where can you go to learn more? We have evaluated a few sources for you:. It covers long term as well as short term investment strategies, and the psychology of investing as well. Click here to visit the course. The book is geared explicitly towards beginners — it includes a step-by-step tutorial to setting up your wallet and buying, selling and important!
It was founded in early and has since then helped thousands of viewers investing in a smart way. The channel currently has more than Crypto News posts new content almost daily, so check back often. Nowadays, Bitcoin futures can be traded on a variety of regulated exchange platforms, in addition to a few unregulated ones. The great majority of Bitcoin futures are settled in cash, though an increasing number of platforms are beginning to offer physically-settled Bitcoin futures, which means they pay out BTC upon settlement.
This can likely be attributed to the fact that at least initially, all Bitcoin futures were regulated by the Commodity Futures Trading Commission CFTC , making them much more attractive to institutional investors and hedge funds. Similarly, Bitcoin futures also act to help to reduce the price volatility of what can otherwise be considered a volatile asset through more efficient price discovery. Although Bitcoin futures are widely acknowledged as a boon for the Bitcoin markets, they have often been met with criticism.
For one, some argue that Bitcoin futures actually negatively influence BTC markets through price manipulation. Likewise, because many Bitcoin futures are actually traded in and settled in cash, it can be argued that Bitcoin futures actually reduce the liquidity of the underlying Bitcoin market. This might not be the case for long, however, since physically-delivered Bitcoin futures are now available from Bakkt. With any Bitcoin futures contract, there is a buyer that agrees to sell BTC at a certain price on a certain date, and a buyer that agrees to buy it at that price on that date.
On the flip side, traders that want to short Bitcoin would want to be the seller on a contract that settles at higher than the current price of BTC. Four of the most well-reputed options are outlined below. BitMEX is one of the most popular Bitcoin futures platforms in operation and today and has become somewhat of a tour-de-force in the cryptocurrency space. Part of the reason BitMEX is so popular is due to its accessibility. Despite being unregulated, BitMEX operates easily one of the largest insurance funds of any Bitcoin futures trading platform—whether regulated or not.
To begin, create an account on the platform and click the verification link you will be emailed. Launched back in , Deribit was one of the first exchanges to offer Bitcoin futures and still remains one of the most popular Bitcoin futures exchanges today. Unlike BitMEX which offers futures for several different cryptocurrencies, Deribit has a sole focus on Bitcoin futures.
As it stands, Deribit offers two Bitcoin futures contracts—one short term and one medium-term expiration. Besides offering Bitcoin futures with two different expirations, Deribit also offers a Bitcoin perpetual swap product, which has no defined expiration date and differs from traditional Bitcoin futures in a few other ways. Deribit is known for its impressive liquidity, making entering and exiting positions a painless process. Like all good Bitcoin futures trading platforms, Deribit also maintains an insurance fund that should cover the losses of any bankrupt traders.
As far as derivatives trading platforms go, Deribit is also one of the simpler to use, making it ideal for those first getting to grips with trading Bitcoin futures.
To begin buying and selling Bitcoin futures on Deribit, you will first need to create an account and verify it. Once verified, login, click your username on the top right and select the deposit option. Here you will find your deposit address, use this to load your account with the BTC you will use for trading.
Once selected, the trading panel will be loaded at the bottom of the page, where you will be able to set the number of contracts to buy and choose whether to buy or sell. Although BitMEX and Deribit are designed for both casual and professional traders, there are also a number of Bitcoin Futures trading platforms that are designed with institutional customers in mind.
Nonetheless, as two prominent platforms that are directly involved in shaping the Bitcoin market, it is important to understand what Bakkt and CME are and what they offer. This is in contrast to most other Bitcoin futures exchanges, which settle Bitcoin futures in cash. Bakkt only allows trading during certain hours, these are p. EPT to p.