Sunday, May 05, 2019

Margin Requirements for Bitcoin Futures Trading

I just discovered that while going long a Bitcoin futures contract requires margin of about USD 16843.75 per contract, going short requires initial margin of USD 200k at Interactive Brokers. Do they really think that Bitcoin could rise by a factor of 7-8x when the market is closed?* This makes it much harder for people to go short and contributes to the inefficiency of this market. Importantly there are no options on these futures, so you can't hedge against large adverse movements. I can't see anything about this asymmetry in margin on the CME site, so I assume that it is set by the broker.

* Stops will only work when the market is open. The Globex futures market is open 23/5 - closed one hour each day and over the weekend.

1 comment:

JIm said...

Yes, is probably the answer. The bitcoin market is hugely inefficient and who the hell knows what would happen outside market hours. The broker is protecting themselves against not only price volatility, but also default by the counterparty. Given how opaque Bitcoins are, I'd argue that they are never going to properly efficient. Too much fraud and very limited big player involvement.