Bitcoin Event Contracts offer the simplest way to access Bitcoin exposure at its most liquid and institutionally trusted price – the regulated CME CF Bitcoin Reference Rate
The CME’s recently-launched Event Contracts on Bitcoin Futures are the latest enhancement of its suite of regulated crypto contracts, enabling improved flexibility of access to and management of Bitcoin exposure.
Like all CME Bitcoin products, CME Event contracts on Bitcoin Futures settle to CF Benchmarks’ regulated CME CF Bitcoin Reference Rate (BRR) , assuring the highest possible reliability, accuracy and resistance to manipulation.
Still, the difference between Bitcoin Event Contracts and other CME Bitcoin products, is their uniquely ‘retail' interface to institutionally trusted Bitcoin exposure.
So, we think it’s instructive to outline their key features.
What are they?
In essence, they are daily expiring, limited-risk, cash-settled, ‘European-style’ options on Bitcoin futures, designed to cater to short-term trading opportunities, with contract values that are lower than other CME Bitcoin derivatives, all of which settle to the BRR.
What are they for?
Event Contracts on Bitcoin Futures are designed to provide straightforward, short-term exposure to Bitcoin.
Meanwhile, the remainder of the CME’s BRR-powered BTC contracts and other products—futures, Micro Bitcoin Futures, Trading at Settlement and Basis Trade on Index Close—cover most professional and institutional exposure and risk offsetting requirements at scale.
This means Bitcoin Event Contracts will generally serve as an avenue for regulated institutions to offer regulated Bitcoin exposure to individuals.
As we’ve often explained, the complex consists of participants and counterparties transacting billions of dollars’ worth of bitcoin and bitcoin products, thereby contributing to, and/or directly referencing the BRR and/or its real time variant the CME CF Bitcoin Real-Time Index.
The complex provides additional assurance that all CME Bitcoin products, including Event Contracts, are underpinned by the most, reliable, efficient and trustworthy Bitcoin market possible.
Bitcoin Event Contract Essentials
The above essential points shouldn’t obscure just how simple Event Contracts are.
Fortunately, this simplicity is easily illustrated:
Premises behind ‘Regular’ BTC options:
Let’s consider a regular CME BTC Futures call option for this:
(Remember, CME Bitcoin Futures are cash-settled - no bitcoin is ever delivered.)
It’s easy to imagine similar statement for short CME BTC calls, and long/short CME BTC puts.
Bitcoin Event Contract premises:
By contrast, a CME Event Contract can be expressed as a simple ‘Yes/No’ choice:
The ‘Yes’ Contract can define the expectation of an affirmative answer to a question like this:
Likewise, the ‘No’ contract can define the expectation of a negative answer to a question such as this:
The outcome of the event determines whether the trade results in a profit or loss.
As this banner from the CME’s Event Contract page shows, premises behind a BTC Event Contract trade could scarcely be clearer.
Simpler options, same high standards
Still, it is important to understand that whilst ‘packaged’ in a simplified way, event contracts are still fully fledged options:
This has a number of implications.
In other words, the CME has eliminated the risk that an entity could exert undue influence on the bitcoin market using Event Contracts, in the same way that such risks have been eliminated for other CME Bitcoin products.
Meanwhile, with Bitcoin Event Contacts powered by the BRR’s proven reliability, accuracy and manipulation resistance, it should be clear their simplicity implies no short cuts in market integrity and governance.