The US-based Bakkt Bitcoin and cryptocurrency platform will launch the first CFTC-regulated options contract for Bitcoin futures on December 9 this year. Once launched, it would become the first platform to launch a regulated Bitcoin options contract on Bitcoin futures.
The Bakkt Bitcoin options contract will be based on the benchmark Bakkt monthly Bitcoin futures contract and represents another important step in developing this asset class for institutional investors. The Bitcoin options contract offered by Bakkt will have eight key features which include capital efficiency, cash or physical settlement, European style options, attractive fees, broad distribution and liquidity, instant messaging, block trades, and options analytics.
Bakkt’s CEO Kelly Loeffler said in a Medium post that the platform is committed to bringing trust and utility to digital assets and the options contract is an example of the many products it is developing for regulated markets. “The Bakkt Bitcoin Options contract will be based on the benchmark Bakkt monthly Bitcoin futures contract and represents another important step in developing this asset class for institutional investors, their customers and investors,” Loeffler said.
Notably, customers will have the choice of options contracts settled with cash, meaning customers receive the fiat equivalent to the contract’s value at expiration, or physically, meaning they receive the actual Bitcoin, Loeffler said.
When Bakkt launched its Bitcoin futures contract last month, the company saw low trading volume. However, it appears to have picked up in recent days. Loeffler added: “We’ve been working closely with market participants to build liquidity, create market transparency and build open interest. Notably, we saw a record 590 contracts of Bakkt Bitcoin Monthly Futures change hands yesterday, October 23. We also completed a milestone with seamless physical deliveries in both our daily and monthly Bitcoin futures contracts.”
Meanwhile, Bakkt is joining CME in launching options. The Chicago-based exchange announced it would launch Bitcoin options on top of its futures contracts in the first quarter of 2020. In addition to its options contracts, Bakkt is launching a market maker program to boost trading of its monthly contract, according to a letter addressed to the U.S. Commodity Futures Trading Commission (CFTC). “The Exchange believes the new Program will incentivize additional liquidity and volume in the new Bakkt Bitcoin (USD) Monthly Futures Contract,” the letter states.