Bitcoin futures set to begin trading at Chicago exchange

Bitcoin is an online currency that allows people to make one-to-one transactions, buy goods and services, and exchange money across borders without involving banks, credit card issuers or other third parties. (AP FILE  PHOTO)

CHICAGO — A security based on bitcoin, the digital currency that has exploded in popularity and volatility this 2017, was to begin trading on a major United States exchange for the first time on Sunday.

The Chicago Board Options Exchange (CBOE), one of the nation’s largest traders of options and futures, planned to open up bitcoin futures for trading at 5 p.m. CST.

The CBOE futures do not involve actual bitcoin. They are securities that would track the price of bitcoin on Gemini, one of the larger bitcoin exchanges.

Another large futures exchange, the Chicago Mercantile Exchange, would start trading its own futures on December 18 but would use a composite of several bitcoin prices across a handful of exchanges.

The price of a bitcoin began the year below $1,000. As of 3 p.m. Sunday, a bitcoin was quoted at $15,375 on the bitcoin exchange Coindesk.

Futures are a type of contract in which a buyer and a seller agree on a price for a particular item to be delivered on a certain date in the future, hence the name. Futures are available for nearly every type of security but are most famously used in commodities such as wheat, soy, gold, oil, cocoa and, as dramatized in the Eddie Murphy and Dan Aykroyd movie “Trading Places,” concentrated frozen orange juice.

The futures signal greater mainstream acceptance of bitcoin but also open up bitcoin to additional market forces. The futures would allow investors to bet that bitcoin’s price will go down, called shorting bitcoin, which currently is very difficult to do.     /kga