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The post below on Bitcoin Futures is the opinion of Optimus Futures. Please note that price movements on Bitcoins are driven primarily by the news and prevailing sentiment of retail speculators. These sometimes dramatic shifts can lead to massive intraday price swings, making Bitcoin Futures a product for aggressive and experienced day traders. The price we have used below may change due to the volatility of the underlying contract. There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.
The first thing you need to decide is whether you are interested in holding Bitcoins as a long-term investment or do you want to trade Bitcoins and take advantage of its daily price fluctuations? In our opinion, the idea of Bitcoin Futures is a neat proposition because it allows traders to take advantage of small or large fluctuations on both the upside and the downside by utilizing the leverage of a futures contract.
If you believe that Bitcoin has reached a temporary peak, or is in the early stages of a downtrend, you can short it. Again, you can simply take advantage of the daily price swings and close your positions at the end of the day.
Your account is only affected by the commissions and the gains and losses that occur as a result of your trading activity. Bitcoin Futures Contracts allows traders to go long or short without actually holding the Cryptocurrency. This means traders can get exposure to the price of the Bitcoins without worrying about the security risks associated with storing it. This is similar to trading Energy Futures such as oil where you speculate on its price rather than physically owing oil.
Trading in Bitcoin Futures does not require you to own any Bitcoins. CBOE offers trading across a diverse range of products in multiple asset classes and geographies, including options, futures, U.
Both exchanges are regulated by the CFTC to avoid price manipulation, fair dealing and price transparency. It oversees some of the most sophisticated risk management practices in the financial world and provides services that substantially mitigate the risk of clearing member failure.
As the world of cryptocurrency gained popularity, many institutions have been formed to trade and invest in the digital currency space. As such, many of these institutions labeled themselves as an exchange. However, very few, if any, of the new players in the markets, have the safeguards that long-standing exchanges such as the CME and CBOE have established in place in order to ensure fair price dealing.
When you trade on the CME or CBOE exchanges your funds are not being held by the exchange, there is no spoofing to create fake volumes, nor do they take opposing positions in the marketplace. Your funds will be held by the clearing firm FCM you choose. We truly believe that the introduction of Bitcoin Futures by the CME and CBOE will not only attract professional traders to reallocate their funds from those so-called exchanges but also open the asset to institutional investors.
To put that into perspective, the smallest price fluctuation for the ES is 25 cents. Dollar price of one bitcoin as of 4: It is representative of the bitcoin trading activity on Constituent Exchanges and is geared towards resilience and replicability. It assures that the pricing of the Futures market is accurate and fluctuations in price reflect the reality of the Bitcoin fundamentals.
In laymen terms, the CME is using what is considered a credible source of information so you can just focus on trading futures. We believe that as the Bitcoin Futures on the CME exchange gains popularity and liquidity amongst traders, it will also be a major force in determining the price of Bitcoin. XBT futures are designed to reflect economic exposure related to the price of bitcoin. The final settlement value for XBT futures will be the official auction price rounded to the nearest penny for bitcoin determined at 4: Eastern time on the final settlement date by the Gemini Exchange.
In order to participate in any futures market, traders have to pay for several transaction costs that make up your total commissions. There are four basic types of fees incurred every time you trade a single bitcoin futures contract, assessed on a per-contract basis. For every contract traded, the following fees are passed on to the trader. As opposed to other Cryptocurrency brokers, we do not charge you extra for leverage and you do not pay based on the equity you purchase.
Price Limits are hard and soft limits imposed by the CME exchange where they cease all trading to protect the price integrity of the buyers and sellers.
Why is that necessary? We live in a world of unfiltered news, algorithms, and HFTs. There could be a number of events that can trigger a rapid or sudden price decline. As such, sometimes it is necessary to investigate whether such news or events justify such drastic price movements.
This is one of the advantages of trading on a regulated exchange. After these limits limited op or limit down are hit in the lead month, a 2-minute pause will occur and the price could not exceed these limits, however, prices would continue trading within the limit bands but not exceed the price limit band. However, the CBOE will apply a two-minute halt if prices are above or below the settlement price. Futures trading gives you the ability to use leverage by allowing you to control large dollar amounts of Bitcoins with a small amount of capital.
This amount of capital that is used out of your account when trading a futures contract is known as margin. Margin offsets with other CME products will not be offered initially.
CBOE notional value of each contract is one. The margin calculations above are based on a 15K Bitcoin. As you probably know the prices of Bitcoin are highly volatile and subject to change. Margins, although determined by the exchanges, could be different than what FCMs and brokers require.
Day trading margins are determined by our clearing firms and are typically provided as a percentage of the initial margin or a dollar amount. This is the amount of money you need to daytrade the Bitcoin contract i. The cryptocurrency technology is new technology and it is evolving rapidly with new and influential players entering the space every day.
As such, rumors, whether substantiated or not, can affect the pricing in very extreme ways. Unlike other asset classes FX, Equities, Commodities, etc. As such, we believe that you should not extend your trading beyond day trading and NOT leave positions for overnight or the weekend.
Our main concern is the price gaps that can occur and affect your account adversely. We do not encourage anyone to trade with a higher number of contracts due to a higher level of risk-reward.
Put bitcoin futures on the subject. You do not have to worry about delivery when trading Bitcoin Futures. We suggest that you always trade in the liquid month. This means that once the liquidity of the Futures contract has started going down, you should trade the next month. Again, as we mentioned above, the advantage of trading with Bitcoin Futures is that you can enjoy the benefit of speculating in them without actually owning it.
With the introduction of Bitcoin Futures, you can now take advantage of the massive selection of futures trading platforms that connects to the CME, opening the technology that was previously only available to Commodity Futures traders. Experience fast order routing through industry-leading trading platforms powered by multiple data feeds from some of the biggest names in the trading technology field.
Trade on desktop, mobile or web. The Futures industry is a mature industry and as such has evolved to execute and create strategies for very sophisticated traders. Bitcoin Futures Options are not available yet via the exchanges. Once they are available, we will update this notice. Bitcoin Futures will also allow puts and call on the Futures contract. This can help traders who wish to speculate on Bitcoin but want to limit their risk.
You can bet on the direction of the upside using calls, and use Puts for the downside. When you buy Options and go long on premium, all you can lose is the cost of the Options and the commissions you paid. However each Options has a time expiration, and at the time of expiration, you can lose the entire premium of the Options and the commissions you paid for it.
An IRA Individual Retirement Account is a trust or custodial account set up in the United States for the exclusive benefit of you or your beneficiaries. We work with a number of IRA custodians that work directly with the Futures industry. Once you select a custodian, simply Open an Account with us with the clearing firm of your choice and we will work with the custodian to complete all the necessary paperwork to establish your new IRA.
If you need help determining the right custodian and clearing firm, please contact us and one of our licensed brokers will help you choose the combination best suited to your goals. Speculation in Futures carries high risk. Be very cautious and monitor any investment that you make.
Optimus Futures is a leading online futures broker that caters to traders seeking fast execution and stable data feeds combined with aggressive margins and deep discount commissions. About Optimus Futures Optimus Futures is a leading online futures broker that caters to traders seeking fast execution and stable data feeds combined with aggressive margins and deep discount commissions.