The North American Derivatives Exchange, or Nadex, plans to launch bitcoin binary options contracts in early December, subject to filing with the Commodity Futures Trading Commission.
Nadex, a regulated online binary options exchange, will list the daily and weekly bitcoin binary options contracts with prices based on TeraExchange’s Tera Bitcoin Price Index (TeraBit Indexsm), the global benchmark for USD/XBT contracts.
Nadex says it has seen strong consumer demand from retail traders looking for new ways to trade bitcoin. Similar to other binary options contracts on Nadex, investors can trade based on where they think the bitcoin binary contract is heading using daily or weekly contracts. A binary contract is one in which the payoff can take only two possible outcomes: a fixed amount or nothing at all.
Timothy McDermott, Nadex CEO, said:
Bitcoin binary options are an exciting way to participate in the bitcoin phenomenon while limiting risk. Our innovative short-term contracts provide a way to trade in a transparent, regulated market where the trader’s exposure is known before any transaction is executed. This is especially valuable given the bitcoin price volatility that has often been experienced in the marketplace.
Nadex has selected the TeraBit Index for determining the Bitcoin price because it is the only price index that is calculated by a CFTC regulated firm, and the price index has already been thoroughly evaluated by the CFTC.
Regarding Nadex plans to use TeraBit, Leonard T. Nuara, TeraExchange co-founder notes:
Since launching the TeraBit Index in September we have been approached by a wide array of financial services firms for this benchmark. By working with Nadex to launch its bitcoin binary options, we are thrilled to help make another regulated marketplace available to those looking to take directional views on bitcoin.
TeraExchange, a CFTC regulated trading platform for institutional market participants, serves as both administrator and calculation agent of the index. The Tera Bitcoin Price Index employs an algorithm that compiles and filters data on a real-time basis from a number of widely utilized global bitcoin exchanges. In order to be included in the index, these exchanges are required to execute and maintain an information sharing agreement with TeraExchange, as required by the CFTC.