Unmasking the Bitcoin Fake Out: The Truth about CME Options Expiration

CME Bitcoin options expire on the last Friday of the contract month, at 4:00 p.m. London Time (LT). This means that all open CME Bitcoin options positions will expire and be settled on that day.

CME Bitcoin options are cash-settled, which means that the buyer or seller of an option will receive or pay the difference between the strike price of the option and the underlying CME CF Bitcoin Reference Rate (BRR) at the time of expiration.

For example, if you buy a CME Bitcoin call option with a strike price of $25,000 and the BRR at expiration is $30,000, you will receive a cash payment of $5,000 per contract. Conversely, if you sell a CME Bitcoin call option with a strike price of $25,000 and the BRR at expiration is $30,000, you will pay a cash settlement of $5,000 per contract.

Here is an example of how CME Bitcoin options expiration works:

Scenario: You buy a CME Bitcoin call option with a strike price of $25,000 on September 29, 2023. The option expires on the last Friday of the contract month, which is October 27, 2023.
Outcome: If the BRR at expiration is $30,000, you will receive a cash payment of $5,000 per contract. This is because the underlying Bitcoin futures contract has expired in the money, and you have the right to buy Bitcoin at a lower price than the current market price.
Alternative outcome: If the BRR at expiration is $20,000, your option will expire worthless. This is because the underlying Bitcoin futures contract has expired out of the money, and you no longer have the right to buy Bitcoin at the strike price.
It is important to note that CME Bitcoin options are a complex financial product and should only be traded by experienced investors.

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