Futures on Bitcoin, instructions for use – genxfxtrader

Futures on Bitcoin, instructions for use – genxfxtrader

Since last December 18 two contracts for the future on bitcoin, one negotiated are available in the  CFE  ( CBOE Futures Exchange ) and another on the  CME  ( Chicago Mercantile Exchange ).

Let’s analyze characteristics and differences.
See the table following summary:

Comparative table of the characteristics of futures contracts on Bitcoin

The main difference is the size of the contract:
1 bitcoin in the CBOE to 5 bitcoins on the CME . This makes the former is a more suitable product for retail investors, while institutional investors are likely to focus on the second.

Daily fluctuations of about
20% were not uncommon in the last period and can not be excluded in the future, even if the birth of these contracts is likely to favor the market matures. If these were repeated, they would be translated (at current prices) in increments of 3/4 thousand euros of the value of a contract and 15/20 CBOE thousand euros for CME contract. The size and volatility of the latter (along with margin requirements to be described shortly) make it a challenge for non – institutional investors.


Both contracts provide for
a
cash settlement (cash settlement) . This means that do not provide for physical delivery of the underlying bitcoinsuntil the expiration of the contract, but only the settlement of the cash difference between the opening price of the contract and the closing price.

Suppose you bought a futures contract at 16000 and the price at maturity is 18000. The buyer does not receive the underlying bitcoins, but only the difference in cash between the opening price and the price expires ($ 2,000).


Each futures contract has two types of margins:


If funds fall below the maintenance margin, the investor will be required (via a
margin call ) reset the margin requirements established by the initial margin.

The initial margin of
futures bitcoin XBT CBOE is 44% and the maintenance margin of 40% of the reference price the previous day. The initial margin of future CMC BTC bitcoin is equal to 47%, while the maintenance margin is equal to 43%.

Take an example of the
operating mechanism of futures margins Bitcoin.


For simplicity, we will
use the CBOE contract that has only one bitcoin by underlying.


Suppose we buy one futures contract for $ 18,000.


Contract value = $ 18000 * 1 = $ 18000 bitcoin


initial range = $ 18000 * 44% = $ 7,920


Maintenance margin = $ 18000 * 40% = $ 7200


Suppose that the price rises to $ 20,000.
The inverter can leave the open position if expected increase or resell market and monetizing a profit of $ 2,000.


Now consider what happens if the price drops to $ 15,000.


The investor suffers a loss of $ 3,000 that is intended to reduce the funds in your account.
The initial margin of $ 7920 are reduced to 4920.


Are there
enough to meet margin requirements? These should be recalculated based on the new price of the futures contract.


The new initial margin becomes $ 6,600 ($ 15,000 * 44%) and the new maintenance margin $ 6,000 ($ 15,000 * 40%).
As the sum deposited in the account ($ 4920) it is now less than the maintenance margin ($ 6000) will require the operator to transfer other funds to the margin back to level new initial margin ($ 6600). The trader must deposit $ 1680 ($ 6600- $ 4920) to maintain the open position.


Margins required by the exchanges for futures trading of bitcoin are
high compared to other futures contracts because bitcoin is considered a very risky instrument (margins on futures S & P around 5%).

The
brokers through which carried out the operation may also request additional margin customers. The intermediary approach for bitcoin is very conservative in this first phase. Some require margins are substantially higher than the minimum limits set by the exchanges, while many others are still waiting.

Guarantee future
leverage effect because the amount committed as margin is lower than the notional value of the contract, so the percentage gain or loss, if calculated with respect to the capital actually invested is multiplied. Since the margin required for trading futures bitcoin is higher than other contracts, the leverage is lower, but is still present.

Suppose we buy one futures contract for $ 18,000.
If the value of the contract is 19800 (+ 10%), this corresponds to a profit of $ 1800. However, if I consider the capital actually invested in terms of margin is $ 7920, the 10% increase in the futures price will result in a gain of 22.3% on the margin actually invested (1800/7920) .


Given the volatility of bitcoins, the CBOE has set limits for variations of 10% and 20% compared to the settlement price of the previous day.
The CME predicted soft limits for variations prices 7% and 13% (suspended operations two minutes) and a hard limit for a variation of 20%.


I do not recommend using apalcamiento with bitcoin, it is very ariesgado.
Besides these two companies charge large commissions to manage everything. But you can buy cheap in Cryptoder, all prices offered in euros.



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