BTC futures and XBT futures both track the price of bitcoin, so what’s the difference between the two sets of futures?
For starters, BTC futures trade on the CME (Chicago Merchantile Exchange) and XBT futures trade on the CFE (Cboe Futures Exchange). These are two entirely different futures exchanges, and even though the two futures products track the same asset (bitcoin) the specifications are slightly different.
Key Points
- BTC futures trade on the CME
- XBT futures trade on the CFE (owned by Cboe)
- 1 XBT future = 1 bitcoin — Minimum price fluctuation = $10
- 1 BTC future = 5 bitcoin — Minimum price fluctuation = $25
- tastyworks is one of the few brokers that lets clients trade bitcoin futures without $25,000 minimum requirement or monthly market data fees
- tastyworks is also the most lowest cost bitcoin futures broker at $1.25 per contract
BTC Futures Specifications
BTC futures will begin trading on the CME on December 15th, 2017. The contract unit for BTC futures is 5 bitcoins.
This means the total notional value of a BTC futures contract is 5 times the current price of spot bitcoin.
For example, if BTC/USD is trading at 17,000, by purchasing or selling one BTC futures contract, you will be transacting $85,000 worth of bitcoin. This is what is referred to as the notional value of a futures contract.
The beauty of futures, just like options, is leverage. To trade one BTC futures contract, you won’t need to put up $85,000 in margin requirements.
XBT Futures Specifications
XBT futures began trading on the CFE (a division of the Cboe) on December 11th, 2017 and were the first US bitcoin futures ever. The contract unit for XBT futures is 1 bitcoin. Unlike BTC futures, XBT futures represent the value of spot bitcoin. There is no multiplier.
Using the example above, if BTC/USD is trading at $17,000, by purchasing or selling one XBT futures contract, you will be transacting $17,000 worth of bitcoin.
XBT moves in increments of 10 points and the value of each price fluctuation is $10. In other words, 1 point of XBT = $1.00, but XBT moves in 10 point increments only. For example, if you buy one XBT futures contract at $17,000 and bitcoin rallies to $17,500, what will your profit be?
It will be $500 (500 points x $1 per point, or 50 ticks x $10 per tick).
BTC Futures vs XBT Futures
The key differences between XBT futures and BTC futures are tick size and tick value. Both futures track the price of bitcoin and both futures are perfectly suitable for speculating or hedging bitcoin.
XBT futures might be more popular since they were released first, and therefore they might trade more volume and have better liquidity in the short-term.
Margin Requirements for BTC Futures vs XBT Futures
Because bitcoin is such a volatile asset, margin requirements are starting off high for futures contracts.
For the CFE’s XBT bitcoin futures, margin requirements are as follows:
- Initial margin requirements: 44% of the current daily settlement price
- Maintenance margin requirements: 40% of the current daily settlement price
For the CME’s BTC bitcoin futures, margin requirements have not been decided yet. We will update you as soon as we here anything.
How to Trade BTC and XBT Futures
As bitcoin futures are becoming more popular, more brokerages are making them available to their clients.
tastyworks is unequivocally the best choice to trade bitcoin futures due to their low margin rates and extremely low pricing starting at $1.25 per contract.
Plus, tastyworks was built for futures and options traders, so all of the trading software is top-notch and data is free. See the full tastyworks review here.
To put all this perspective, TD Ameritrade charges $2.25 per contract for futures and Interactive Brokers charge a special rate of $5.00 per contract for all bitcoin futures! That is ridiculous pricing!
tastyworks offers WAY better customer service than Interactive Brokers, and their per-contract futures pricing is just as cheap. You’ll save over $4.00 on every trade when compared to TD and Interactive Brokers just by trading futures with tastyworks. And if you trade 10 times a day that’s $40 in free savings.
Ally Invest is another very popular choice to trade bitcoin futures, and their pricing is very cheap at $0.85 per contract. However, to trade futures with Ally, you’ll also have to open up an account with MB Trading, which Ally recently acquired.
Final Thoughts
Because futures trading is NOT subjected to the stupid FINRA pattern day-trading rules, you can trade futures and futures options as many times per day as you wish without having to maintain a minimum balance of $25,000 like you have to maintain for day-trading stocks and stock options.
That is why it is paramount to keep your futures commissions as low as possible, because futures traders can easily trade multiple times per day. If you make 10 round-trip futures trades in one day, even if you’re trading 1 lots, commission dollars will rapidly build up.
As a trader, every dollar you spend on commissions is a dollar you could have had in profits or a dollar you could have prevented in losses.
