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I find Bitcoin really fascinating. Just earlier this week, I came across this entity called Wrapped Bitcoin and hastened to learn all about it.
Then, last night, I came across this offering called Micro Bitcoin on Interactive Brokers, one of the most renowned brokers for traders and investors around the world.
So I endeavored to find out more about Micro Bitcoin Futures that is offered by the CME group. This is what I learned through YouTube and other sources:
1) Micro Bitcoin Futures are equivalent to 1/10 of one bitcoin. Due to their smaller size, Micro Bitcoin Futures aims to hedge Bitcoin's price risk since investors can exercise more control over the amount of bitcoin exposure in their trading strategies. This undoubtedly helps increase the precision of their Bitcoin risk management.
2) A standard-sized contract comprises 5 bitcoins. Since Micro Bitcoin Futures consist of just 0.1 bitcoin, this means that they are equivalent to 1/50 the size of the CME standard Bitcoin futures contract, which is settled to the regulated CME CF Bitcoin Reference Rate. This makes it cheaper for investors to participate in the growing Bitcoin market as one contract can cost as low as 50 cents! However, traders should note that pricing of these micro contracts may not exactly track the pricing of their larger Bitcoin futures.
3) Micro Bitcoin Futures are listed on the nearest 6 consecutive monthly contracts, inclusive of the nearest 2 December contracts. So if your nearest 6 consecutive contracts are scheduled from January to June this year, December this year as well as the December of the next year will also be listed. Traders need to take note of these dates carefully as this will have implications on when a contract expires and when the next contract begins. They should also note that Micro Bitcoin Futures contracts have the same expiration as their larger-sized counterpart.
4) Trading for Micro Bitcoin Futures will commence from Sunday 6PM ET to Friday 5PM ET, with a 60-minute break each day beginning at 5:00 p.m. ET. Hence, it is available almost 24/7.
5) Micro Bitcoin Futures enable traders to save on potential margin offsets with Bitcoin futures and options.
My Views on Micro Bitcoin Futures
I find it interesting that though crypto is a radically different asset class from the other conventional asset classes out there, it can still be offered in myriad ways that tailor to the diverse risk appetites of investors. For instance, I am rather risk adverse and am happy to earn some interest just by HODL-ing my Bitcoin asset in a crypto lending platform called Hodlnaut. I am not even certain if I will invest effort in wrapping my Bitcoin in a bid to generate higher interest on the Ethereum blockchain. Hence, to be honest, engaging in micro bitcoin futures seems a tad too risky for my liking even if they are smaller in size than standard contracts. Determining specific timings to enter and exit the futures market makes me shiver a bit.
Maybe when I grow more comfortable with the idea of actively trading stocks, I will look into trading these micro bitcoin futures.
How about you? What is your comfort level in regards to Micro Bitcoin Futures?
Photo by Crypto Crow from Pexels
