By Bakkt, a new futures contract crypto service, delivered its much-anticipated services on 23 September, which made it possible for physical delivery of Bitcoin. Its doors are now open to institutional investors who can take positions, both long and short. But that didn’t stop it, the platform has now announced that it will soon be launching a regulated options contract for Bitcoin futures.
As per a medium post from the exchange, Bakkt Bitcoin options will go live on December 9 and will be based on the Bakkt Monthly Bitcoin Futures contract and thus will be acting as another step in developing this asset class for its customers.
Some key features are:
- Capital efficiency: Margined contracts, and cross-margining with the underlying futures contract
- Cash or physical settlement: Options will settle into Bakkt’s monthly bitcoin futures contract with time to roll, closeout positions or take physical delivery
- European style option: This contract design avoids early exercise and reduces operational burdens
- Attractive fees: $1.25 per options contract (1 contract = 1 bitcoin) starting in January 2020, following the fee waiver in December 2019
- Broad distribution and liquidity: ICE Futures U.S. markets are accessible globally and have dedicated market makers to support liquidity
- Instant Messaging: Collaborate with other market participants using ICE Chat, which can be tailored to support your compliance requirements
- Block trades: Access more trading opportunities as block trades by leveraging ICE Block
- Options analytics: Use ICE Options Analytics to support options valuation, analysis and risk management
One of the most important things is that the new features will be based on customer feedbacks and is designed to hedge or gain bitcoin exposure. Further, the post also explained:
“ICE Futures U.S. has self-certified the contract with the CFTC and we’re excited to leverage the benchmark futures prices and institutional-grade custody to meet the needs for a regulated options contract.”
The post also noted that the platform saw a record 590 contracts of the Bakkt Bitcoin Monthly Futures contract, making it an all-time high and a milestone for the platform.
Earlier this month, ICE, the governing body behind the New York Stock Exchange (NYSE) was able to successfully execute the first block trade of Bakkt Bitcoin futures contracts. This feature will now be a part of the Bitcoin Options Contract as well.
Bakkt is a bridge for institutional investors to be exposed to the crypto industry. However, the crypto community is divided over the impact of Bakkt futures services. According to John Todaro, the director of research at TradeBlock:
“It will take time for these entities to become comfortable with the asset class, identify strategies that are best used to trade the space, understand crypto market liquidity, and also understand the different regulatory and tax obligations across jurisdictions they operate in.”
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