CME’s bitcoin volatility index futures began trading last week, offering investors a new way to trade and hedge price volatility. DV Chain and Monarq Asset Management executed the first block trades and started trading the contracts.
These volatility contracts track the CME CF Bitcoin Volatility Index (BVX), which represents the market’s expectations for bitcoin volatility over four weeks. Their debut allows traders to take positions directly on expected price turbulence rather than just price direction.
This distinction is important because most derivatives, including futures, perpetual futures and options, require an overview of where the price is going. Volatility futures eliminate this complexity and let traders express a view solely on how BTC will move in either direction.
It opens the door to a new set of hedging and portfolio strategies that were previously difficult to execute in regulated venues. Think about positioning how much bitcoin can move around events like this week’s US inflation data – traders can go long or short volatility depending on their outlook.
Shiliang Tang, CEO of Monarq, called the launch a positive step in the expansion of regulated volatility offerings.
“As bitcoin continues to mature into a more mainstream institutional asset class, the demand for sophisticated risk management instruments grows alongside it. Robust tools like CME Group Bitcoin Volatility futures are exactly what investors need to accurately express their market views and effectively hedge their portfolios within a safe, transparent framework,” he said in the press release.
Monarq Asset Management is an institutionally focused quantitative and systematic digital asset investment firm managed by former executives from firms such as LedgerPrime, Tower Research and BlockTower Capital. DV Chain is a liquidity and market-making service provider.
The launch of volatility futures expands CME’s existing product suite, which includes bitcoin and ether standard and micro futures and options contracts. The platform’s crypto derivatives business has reached around 266,900 contracts year-to-date, up 38% year-on-year, while average daily open interest stands at around 274,500 contracts, up 18%.
