Bitcoin futures are the hottest commodity on the market today. So hot, in fact, that the Chicago Mercantile Exchange, also known as the CME, is bringing their own bitcoin futures, which will trade with the ticker symbol BTC, to the market this Sunday, December 15th, 2017.
But a different brand of bitcoin futures have already been on the market for one week thanks to the Chicago Futures Exchange that trade with the ticker symbol XBT. So what are the new CME bitcoin BTC futures and how do you buy CME bitcoin BTC futures?
Key Points
- 1 CME bitcoin BTC future = 5 bitcoins
- Maintenance margin set by CME for BTC future is 43%
- Tick value (minimum price fluctuation) is $25
- Use tastyworks to trade CME bitcoin futures for as low as $1.25 per contract
How to Buy CME Bitcoin BTC Futures
Not to be confused with XBT bitcoin futures that trade on the CFE, BTC bitcoin futures trade on the CME and represent 5 bitcoins per contract.
This means, when you purchase one BTC future, you’ll effectively be purchasing five bitcoins. The awesome part about this is that you won’t have to use 5 x the current price of bitcoin in buying power.
With BTC futures you’ll only have to use 45% of the price of the contract. This margin requirement is decided by the exchange and is passed on to brokers who can then decide what the fee is for their clients.
Creating a Futures Trading Account
In order to buy or sell futures, you’ll need a futures trading account. Currently, the best option is to use tastyworks. They’re a phenomenal futures trading broker and have some of the lowest prices and best trading platforms in the game.
They only charge $1.25 per contract and offer discounted pricing for highly active futures traders, if you ask.
Once you’re account is open and funded, you can use tastywork’s mobile application, desktop software, or their robust web-based trading platform to place a buy order for BTC futures.
Buying and selling futures is very similar to buying and selling stocks. The order types and prices work essentially the same way. Except, with BTC futures, the minimum price increments are $25.00. This means if the front month BTC future is currently trading at $16,500, the next available price to buy it will be either $16,475 or $16,525.
CME Bitcoin BTC Futures Specs
Trading Hours: 5:00 p.m. – 4:00 p.m. CT Sunday – Friday
Ticker Symbol: BTC
Tick Size: 25 points
Tick Value: $25
Settlement Value Symbol: BRR (Bitcoin Reference Rate)
Position Limits: 1,000 contracts
Price Limits & Trading Halts as Per the CME
CME bitcoin BTC futures will be subject to daily price fluctuation limits of 7%, 13% and 20%.
These limits apply to both upside and downside price changes. The first two price limits, +/- 7% and +/- 13%, are soft limits, which means if the lead month contract hits limit-up or limit-down, a two-minute monitoring period will begin. During this monitoring period, trading will continue within the applicable price limit, but may not exceed that limit.
If, at the end of the two-minute period, the contract comes off that limit, then trading will continue without a halt at the expanded price limits of +/- 13% and +/- 20%, respectively.
Conversely, if the contract is still at the limit at the end of the monitoring period, then there will be a two-minute trading halt where the contract will enter into “a pre-open” market state. During the pre-open market state, trade matching does not occur but orders can be entered, modified or cancelled. After the two-minute halt, the contract will resume trading at the expanded price limits of +/- 13% and +/- 20%, respectively.
The +/- 20% limit is a hard limit, which means if the contract trades at +/- 20% limit, a trading halt will not be triggered and price limits will not expand; instead, trading will continue at or within the +/- 20% limit for the remainder of the trading session.
Why Futures Are Better
As noted in many of our other posts about futures, the FINRA pattern day-trader rule doesn’t apply to futures or futures options. This means you can buy and sell all futures and futures options as many times as you want per day without having to maintain a minimum account balance of $25,000.
This is one of the key reasons why BTC bitcoin futures are the best option for trading or day-trading bitcoin. Not only do you avoid the headaches of trading on an unregulated cryptocurrency exchange like Coinbase, but you also circumvent the pattern day-trader rule for ETFs and trusts that mimmic the price of bitcoin.
