CME Launches Bitcoin Volatility Futures

CME Group announced, plans to launch Bitcoin volatility futures on June 1st, subject to regulatory review. These contracts will become a new part of their digital asset product line, not directly tracking Bitcoin prices, but allowing investors to trade the implied volatility for the next 30 days.

For the market, the increment lies in the further dissection of risk exposure. In the past, when investors managed Bitcoin risks, the direction of the price was often the main variable; new contracts allow traders to bet or hedge the magnitude of price fluctuations without having to determine whether Bitcoin will rise or fall.

The contract is expected to be coded as BVI, settled in cash, with a contract size in multiples of $500 of the BVX index value. It will be settled to the CME CF Bitcoin Volatility Index, an index derived from the CME Bitcoin and Micro Bitcoin options order books.

BVX measures the 30-day forward-looking implied volatility, with data published every second from 7:00 AM to 4:00 PM Chicago time. Compared to spot price indices, it reflects the options market's pricing for future volatility, thus being more akin to a risk management tool.

Giovanni Vicioso, CME's global head of cryptocurrency products, stated:

“With the new Bitcoin volatility futures, traders will be able to invest or hedge the future volatility of Bitcoin, thus gaining a crucial new layer of risk management tools.”

The institutional demand is a key context for this product design. David Schlageter, head of Morgan Stanley's derivatives sales, said that trading volatility directly will help market participants better manage portfolio risks.