The Chicago Mercantile Exchange’s (CME) bitcoin (BTC) futures that expire on Fridays are gaining popularity among news traders, according to CF Benchmarks’ CEO Sui Chung. These cash-settled Friday futures are sized at one-50th of one BTC with lower margin requirements, making them accessible to retail investors. The BFF contract settles every Friday at 16:00 New York Time and tracks Cf Benchmark’s Bitcoin Reference Rate – New York (BRRNY) variant. This new contract is listed on Thursdays at 18:00 New York time, allowing market participants to trade the nearest two Fridays at any given time.
Since its launch on September 30, the CME’s Friday futures have seen significant success, with a first-day trading volume of over 31,000 contracts across two different contract weeks. These weekly contracts differ from monthly contracts in that they allow investors to better express views on Bitcoin’s reaction to specific events, such as U.S. macro data releases like monthly inflation figures and nonfarm payrolls data.
The Friday futures offer several advantages to news traders, including low basis relative to spot prices, lower rollover costs, and more targeted trading strategies. The shorter duration of these contracts limits the gap between futures and spot prices, resulting in a lower premium compared to monthly standard and micro futures contracts. This lower premium leads to reduced contango bleed, making trading more profitable for investors.
Furthermore, the alignment between the Friday futures expiry and the daily NAV calculation of U.S.-listed spot ETFs, most of which refer to the BRRNY, enhances market liquidity. This increased liquidity makes it easier to execute large orders at stable prices and improves the efficiency of the price discovery mechanism.
It is important to note that on offshore unregulated exchanges, retail traders often prefer perpetual futures, which use the funding rate mechanism to keep prices aligned with the spot market. However, these funding rates are volatile, adding an element of uncertainty and unpredictability to trading.
In conclusion, the introduction of Bitcoin Friday futures by the CME has provided news traders with a new and effective tool to capitalize on key economic data releases and news events. With their lower basis, reduced rollover costs, and enhanced liquidity, these contracts offer a more targeted and profitable trading experience for investors looking to react quickly to market developments.