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Bitcoin Futures by the CME
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Bitcoin Futures by the CME

  #11 (permalink)
Market Wizard
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SMCJB View Post
Seeking Alpha : - Andrew Hecht
Two Issues The CFTC And CME Would Be Wise To Consider Before Letting Bitcoin Futures Loose

https://seekingalpha.com/article/4120137-two-issues-cftc-cme-wise-consider-letting-bitcoin-futures-loose

The CME has an arm called "CME Ventures" where they invest or have interest to the best of my understanding in other companies. If you take a look at the link: CME Ventures you will see that they have interest in companies with digital assets. So the decision to launch BitcoinFutures is not one they did on a limb.

The question is liquidity. Could they be competitive with all the OTC exchanges? I think if they build the right leverage than it could be a success. time will tell.

Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

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  #12 (permalink)
North Carolina
 
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I think CME should focus on why traders around the globe are trading BTC instead of CME products. The answer is trivial: CME products too large and some of the more quantitative strategies like arb aren't open to all due to size/speed/etc complexities. My opinion is the CME should work on reducing costs and introducing products that wanna-be professionals can trade. There are way more wanna-be professionals then professionals.

I know they can "fix" their existing products for the small speculator. As for BTC, I think it is a tough challenge. You can't assume that the volatility will stay high. You can't assume the price will stay where it is. Because it is a synthetic, you need to use a consistent methodology for system traders. And BTC trades 24x7. Also, at GDAX I can trade cost free. So, they're going to really have to get everything right to become the preferred trading venue. I don't know the answer to this problem but I hope they make it work for small traders. If they make a great product I will be very interested to trade it. I am going to be shifting my trading effort to the BTC market.

It is a lot different then ES. It trades with pure emotion. I notice, also, it trades on a different clock time. You have a few hours per day to trade the ES typically then it dies. The clock time of BTC is more pure and way faster. It feels like years of trading can get compressed into days. I've started to think like the idea of trying to collect/earn more coins.

I notice something else too that is difficult to exactly explain but BTC at like GDAX will trade in a 1 cent band then explode up or down. So, I feel like the opportunities for trading it are different and probably more centered around price-time then clock-time. Somewhat difficult for me to explain but a 1 minute BTC chart is more similar to a 1 second ES chart. Perhaps this a result of being a low volatility market or the tick size. I'm not sure really.


Last edited by tpredictor; November 3rd, 2017 at 08:34 PM.
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  #13 (permalink)
Market Wizard
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@tpredictor I don't think the CME is going to build the new Bitcoin Futures for the very small speculator. First, as Bitcoin starting to grow as an asset class, the Futures contacts would serve as a hedge for institutional investing. Second, if the leverage is small, it will not attract speculators. You are right there are more non-pros than pros, but the volume that the pros could provide would dwarf what non-pros provide, and I am not even going to mention the frequency. Third, if you look at some of the microcontacts the CME tried to implement, it was a complete failure by all standards. Gold, Currency, and grains.

One thing I agree with you is the OTC markets competition. But, this is specifically why I think the exchange will offer much higher leverage. As an exchange, they do not have to take the same risks as OTC Market Makers so they can provide higher leverage.

I do not think that higher leverage is always healthy financially, but that is what speculators both small and large are attracted to.

If I get to guess the size, just based on intuition, I think it may be $5 per point. But if it was lower, or higher, I would not be surprised.

Thanks,
Matt Z
Optimus Futures

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  #14 (permalink)
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the CME product will give me the comfort level I need to trade Bitcoin futures....and contract volume sweetens the deal. I just don't trust the other exchanges, been burned before.

just my .02

have a great weekend!

Johnny


Last edited by Devil Man; November 3rd, 2017 at 11:00 PM. Reason: .
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  #15 (permalink)
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I think the reason that there is more trader on bitcoin and crypt and the reason and simple any one can make profit and win money the second reason know that trader are human do not know robots or algo so more easy to trade and win money on a movement on trade to win money and not for loss money so on a bullish movement everyone wins, that all

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  #16 (permalink)
Legendary Market Wizard
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tpredictor View Post
I think CME should focus on why traders around the globe are trading BTC instead of CME products. The answer is trivial: CME products too large and some of the more quantitative strategies like arb aren't open to all due to size/speed/etc complexities.

Maybe I miss understand you, but that sounds like you would like a small market with no professionals, so that you can then be/try to be/perform the role of a professional, but on a much smaller scale?

tpredictor View Post
My opinion is the CME should work on reducing costs and introducing products that wanna-be professionals can trade. There are way more wanna-be professionals then professionals.

I think @mattz's answer to this is spot on. But are you serious about costs?

CME charges
  • $1.40 on a $50,000 crude contract (0.000028%).
  • $1.18 on a $125,000 S&P 500 contract (0.0000094%)
  • $0.95 on a $1,000,000 Eurodollar contract (0.00000095%)
While
  • Coinbase charges Americans 0.005% plus 0.0149% to deposit money and 0.0149% to withdraw money

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  #17 (permalink)
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@SMCJB

First, you missed my point and second you are making up stuff that I did not say or think. So, yes you misunderstand me. I'd prefer that both small speculators and large speculators trade in the same venue. But, I did not explain what I was thinking well. The mention of stat arb was just a fleeting thought and not central. It was related to my thought that I don't like externalities as a trader. However exchanges tend to like introducing externalities. A good example of an externality would be a volume discount for large traders. At GDAX for example, large traders -- probably associated with exchange, get a volume rebate on their market orders. This allows them to negatively select limit orders at reduced cost. I only mentioned stat arb in relation to that and thinking about if there were certain barriers of entry to certain strategies, if those could be reduced, to all participants then it would encourage volume. It was never about what I want to do.

Also, I was trying to emphasize that the CME already had good products if they'd simply introduce products suitable for the small speculator.

Also, I never said leverage, even high leverage, was a problem. Obviously, leverage is very useful for any trader. The problem is the low granularity, the poor divisibility, of futures contracts. There is no real reason for futures to have large notional values. I suspect it is merely a forgotten by-product that in the past they needed to counts or whatever by hand. In that case, large notional values are useful because it makes it easier to count. Today, everything is computerized so the large notional values merely serve as a barrier of entry to small speculators. The only other reason large contracts are useful is when you have high fixed costs or fees. I'm not referring just to CME fees but also futures brokers. If you reduce/remove the fees, then there is no rational reason to want to trade put on 1 large lot versus 5 smaller lots. In fact, all things equal it is always better to trade a smaller contract. Of course, you don't want to trade pennies because then it become a network issue but we have very fast networks today. But yes I was also serious about costs because if you have high fixed costs then trading a large contract, if you have a large account, yields a lot more profit. This is why you will notice that a lot of systematic strategies will focus on products that have big tick values. If the fixed costs, i.e broker costs, are high then you need the large tick.

But based on the above analysis, it is rational to conclude that institutions should not really care one way or another what the notional value of the contract is. But, who should care based on a rational analysis? Brokers, middlemen, etc. The only possible risk of a small contract is and this is hypothetical maybe it allows for HFT to game the system by pulling orders or whatever. But that's an HFT problem. Also, the notional value doesn't dictate the leverage in itself, the minimum margin determines that. The notional value or "low granularity" merely determines the minimum size you must trade.

My real point was that most futures traders are trying to trade 2k, 3k, and maybe even 5k. A 3% risk on 3k account is $90. Because risk and reward are related. It basically means keeping risk to 3% per trade or less means the small futures trader is going to have to try to scalp. Scalping today is difficult because of the HFT.

Now, let's say a trader can actually make even $60 per day, in a market like BTC that trades 24x7. Trading just 70% of available with average $60 days produces a return of ~$15,000. At $80 per day, you get ~$20,000. One does not need to make a lot of money per trade to build an account provided there is plenty of regular opportunity. So, that was my only real point. Of course, one can do the same in futures if you are selective and if the opportunity is present. But, typically speaking, trading futures, you will need to risk more then 3% if you're only trading a 2k-3k account. Even on something like the ES, a 2 point risk is $100. Most of the ES systems I've seen require a lot more then $100 risk. You're probably looking at say minimum $200, $250, $300 risk per trade for a systematic ES trading system. One of my better systems used an even larger stop and it was very profitable but most of us don't want to risk that much. On a 2k or 3k account, that's 10% account. But, I've already shown that it is possible to build an account with a very low return per day.
And, you are correct there are products/venues that have smaller contracts or products. The problem with those products is they are typically always mediated by an additional layer or broker which means more fees and the trader gives up more edge.

Let's imagine for a moment each point in the ES was worth say $10 vs $50. There are huge advantages. Most discretionary traders can profit from more types of markets then system traders but their average profit per trade is lower. So, the discretionary trader can take a lot more trades. They can build their account up gradually. It is a big advantage for a system trader too and even for a "system subscriber". As a system developer, what's worth the most of all? Your time. If the contracts are smaller, you can deploy to live faster and save development time. By deploying to live faster, you gather more relevant data and you speed up the cycle. From my experience, most ES systems take maybe around $7,000-$10,000 capital. If you made the value 1/5th then you could deploy to live with only $500 to say $1000.

What else? Also for the discretionary trader, the large notional values make it risky to try unfamiliar futures products without first trading on simulator. If the sizes were small though, you could move from say ES to something different like natural gas or crude oil-- without having to have extensive sim experience first. Once you are comfortable then you increase the leverage and only suitable for the trades. It would also mean you could trade a lot of different contracts with even a small account. Again, there is no technical reason it is not possible to do this today.

Also, you can transfer into your wallet at Coinbase and then transfer directly to GDAX. There is no cost to that if you use bank transfer. You are confusing buying BTC for use purposes or credit card vs trading. You are also confusing with transferring money into the account vs actually trading it. Most futures traders wire the money in-- so that's not free by any means. Limit orders are free. Also, again you misunderstood what I was referring too. I was referring to the fact if you drop the contract value then you must reduce the associated costs or it won't help. I was not even referring or thinking to other trading venues.


Last edited by tpredictor; November 5th, 2017 at 05:03 AM.
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  #18 (permalink)
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Just a citation from one of @tigertrader 's favorite blogs - Daily Speculations:

Quote:
"John Netto writes:
There will be a mini-BTC

Henrik Andersson writes:

I'm also curious so I called CME and asked. Each contract will represent 1 Bitcoin and when the contract settles you will receive the cash amount of the Bitcoin Reference Rate. "

Both authors are regular contributors of Vic Niederhoffer's publications, Andersson mainly regarding BTC.

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  #19 (permalink)
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Quoting 
it is programmed to become more scarce

Not before you die.

Gold is programmed to be more scarce, by nature.

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  #20 (permalink)
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Bitcoin and 1992 internet


I do a little light trading on Bittrex and Bitfinex and since they dont have shorting there as a option yet thats all I will use them for . mostly I just keep my online poker playing money there as it is illegal for US banks to transfer money to poker sites I dont see it breaking any laws in that sense. Any way I just wanted to say that most people see Bitcoin as some sort of anomaly still like the internet was in 1992 where most people thought oh thats cute the geeks got a new toy to play with and its a fad that with fade out very soon. We all know what happend in that scenario. Unless there is some sort of unilateral goverment intervention making these crypto coins illegal you may be wittnessing the new world currency in its birth stage. There are over 1500 different types of cryto coins you can trade at the moment and new ones added weekly the most popular one we all know as Bitcoin is about $7500 per coin ATM .. and this could drop or explode in value significantly for many reasons. But one thing that is sure the pace of businesses and industries that are adapting the crypto's into there way of doing business is increasing at a steady rate. The main hurdle i see for crypto's to get past is hacking theft, There is No company, goverment or program written that make this type of currency safer to have than the paper dollars printed everywhere.

Anyway that all have to say on that
Quantismo

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