Nadex, the North American Derivatives Exchange, has launched its own crypto derivative instrument, Nadex Bitcoin Spreads, for a Monday trading debut, giving folks bullish or bearish on the coin another regulated venue to bet against it in the short-term.
As the crypto futures have entered mainstream markets with Cboe and CME listing futures earlier this month, Nadex Bitcoin Spreads promise all the excitement within the sturdy walls of a regulated venue. The new contracts provide retail traders with protection against unlimited losses without getting stopped out, whilst allowing them to bet on Bitcoin’s rallies and drops with equal ease.
Nadex has allowed users to invest in the new market via smaller volumes, not requiring a larger down payment for trades relative to the standard required by futures exchanges. Specifically, Bitcoin spreads contracts are smaller in size with a value of $0.10 per point, as opposed to the $1 or $5 per point with recently listed futures contracts.
At Nadex, trading members are required to make an initial deposit of at least $250, with no minimum balance required thereafter.
While Bitcoin prices constantly move to uncharted territory in the underlying market, the value of the new contract fluctuates within a floor-to-ceiling range, limiting traders’ downside risk while still giving them the ability to capitalize on price swings.
Moreover, the contracts are cash settled, meaning that investors will receive their final payment in cash rather than Bitcoin. That also means that the Nadex doesn’t have to deal with the headache of setting up its own Bitcoin wallet.
The underlying price feed for this class of contracts is the value of the Bitcoin as indicated by the Tera Bitcoin Price Index, which has been calculated and published by TeraExchange since 2014.
As cryptocurrency hype has reached peak levels, Nadex remains the only legal way to trade binary options and spreads in the US. The firm, which provides investors the opportunity to trade stock indices, forex, commodities, economic events and Bitcoin, is regulated by the CFTC as a Designated Contract Market and Derivatives Clearing Organisation.
Commenting on the news, Nadex CEO Timothy McDermott said: “We saw a strong desire from individual traders to access cryptocurrency markets in a way that makes sense for them. The Bitcoin market offers great trading opportunities, but these opportunities can come with significant challenges. Our Bitcoin Spreads let traders take short-term positions in this new market without the hassles inherent in the more institutional futures markets or the physical bitcoin markets.”
Christian Martin, Tera CEO, added: “We’re excited to partner with Nadex as their underlying index provider. Their use of the TeraBit Index speaks to the integrity of its design and the flexibility of its application in settling both our institutional bitcoin forward contracts as well as Nadex’s retail-focused products like Bitcoin Spreads.”