The North American Derivatives Exchange (Nadex), a regulated online binary options exchange, announced it plans to launch bitcoin binary options contracts in early December, subject to filing with the Commodity Futures Trading Commission. Nadex 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 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.
“Bitcoin binary options are an exciting way to participate in the bitcoin phenomenon while limiting risk,” said Timothy McDermott, CEO, Nadex. “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.”
Bitcoin has emerged as an extremely popular digital currency that has seen increasing use and acceptance over the past five years. Currently, in order for retail traders to take a view on bitcoin or trade the product, they have to buy or sell actual bitcoins on a bitcoin exchange. Nadex’s bitcoin binary option contract will allow traders to trade price movements of the popular digital currency without the risk of holding actual bitcoins, giving traders’ unparalleled access to this exciting market.
Nadex 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.
“Since launching the TeraBit Index in September we have been approached by a wide array of financial services firms for this benchmark,” said Leonard T. Nuara, President and co-founder, TeraExchange. “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 a dynamic 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.