Trading Bitcoin through the CME has been a bit of a challenge lately because of the initial margin requirements. Since a normal-sized Bitcoin contract through the CME is equivalent to 5 whole bitcoins, the initial margin was above $125,000.
Bitcoin Initial Margin
CME recognized that the value of Bitcoin has increased significantly that they created a Micro-Bitcoin. This is equivalent to 1/10 of one Bitcoin. I haven’t seen any initial margin requirements yet but generally, they are around 3-10% of contract value I would suspect IM to be around $200-$600 per contract.
From a chart perspective Bitcoin has a nice pattern to it, upward channel, bouncing top to bottom in a steady flow higher. Appears to be a nice market to trade.
A few months ago, I finally downloaded an app on my phone so I could get in on the Bitcoin hype. I went to purchase $500.00 worth of bitcoin and when my order was filled it was higher than the market had ever traded. I first thought I was on a delayed quote but it turned out to be above the market for well over a week.
Just illustrating that not all trading platforms are created equally. That type of performance can be a real issue if you are looking to trade Bitcoin.
Looking for some solid chart analysis? After you have created your trading account you can look for technical analysis in the “Market Insights” tab across the top of the platform.
Benefits to a smaller contract size for Bitcoin on CME
- First and foremost, trading through the CME you have the benefits of trading on a regulated exchange. Remember the short story I had about trading Bitcoin…trading through the CME you have total transparency with price discovery. You see the same price as everyone else.
- Through the use of smaller contracts, you can layer in your exposure. Everyone in trading understands that we do not try to pick highs and lows, with a smaller contract you can begin to layer in and tune your exposure.
- If you are a Bitcoin Miner you now have another option to offset your risk. If you know what price of Bitcoin you need to turn a profit in the future and you are worried about the price of Bitcoin dropping between now and then. You can use this contract.
Want to know more about Bitcoin or Ether Futures? Check out the CME Group. They have great information videos on the futures and options of Bitcoin and Ether futures.
*Trading commodity futures and options on futures involve substantial risk and may not be appropriate for everyone. Past performance may not necessarily be indicative of future results. *