CBOE Launches Bitcoin Futures: Here's How To Trade Them

Wall Street has been watching bitcoin this week, with the price up another 39.8 percent to above $16,000 ahead of the highly anticipated launch of bitcoin futures trading by Cboe Global Markets Inc CBOE starting Sunday. Bitcoin has been around for years, but bitcoin futures trading will make trading a breeze for average retail investors for the first time.

For traders who want to get in on the action starting next week, trading the new CBOE bitcoin futures contracts is simple. First, check to make sure that your broker allows futures trading and that your trading account has permission to trade them. Since futures contracts are leveraged products, traders will be required to meet certain margin requirements as well.

After confirming that the account meets the necessary requirements, buying and selling bitcoin futures is as simple as entering the XBT ticker and clicking “trade.”

Traders are excited about getting access to bitcoin, but investors should understand that buying bitcoin futures is not the same as investing in bitcoin. Cash-settled futures contracts like the XBT are like bets on where the price of bitcoin is headed. If the price of bitcoin rises, a contract holder is paid in cash based on how much the price has risen (or fallen) in the allotted time.

For investors who actually want to own bitcoin but don’t want the hassle of setting up a digital wallet, the Bitcoin Investment Trust GBTC is still likely the best option. The GBTC fund actually owns bitcoins, and shares represent an ownership stake in the cryptocurency. Unfortunately, the GBTC ETF currently trades at a steep premium to the net asset value of the bitcoins it holds.

From 8-9 a.m. Dec. 19, Benzinga's PreMarket Prep Show will devote its entire broadcast to the fascinating new topic of cryptocurrency. Early investors will be represented as well as staunch bitcoin critics. The podcast will include background information and the upcoming changes in the marketplace that will have a long-term impact on bitcoin’s true value.

Related Links:

A Guide To Who Loves And Hates Cryptocurrency

Does Bitcoin Actually Hold Any Value At All?