A Huge Forward Step in Online Trading – Interactive Brokers Bitcoin Futures Trading

Interactive Brokers Review

Bitcoin Futures Trading

If you wish to start your trading and investment career online, you have plenty of options available today. Trading from the comfort of your home is not so surprising anymore with hundreds of brokers offering similar services. However, what really matters now is the level of service and customer experience. Some brokers stick to the basics whereas others like to go the extra mile. One of the brokerage firms providing its services in hundreds of market destinations is Interactive Brokers. Interactive Brokers has recently achieved something that most other brokers might not even have thought about i.e. Bitcoin futures trading.

First, let’s get to know a little about Interactive Brokers, and then get into the details of bitcoin futures trading with one of the best online brokers of the world.

Introduction to Interactive Brokers

Interactive Brokers remains one of the best and the biggest online platforms for investors and individual traders from around the world to conduct online trades. Some of the best features of trading with Interactive Brokers include low costs of trading and high returns. Their online brokerage services are available for individuals at home looking for an extra stream of income and institutional trading as well. Once on the Interactive Brokers trading platform, you have access to trading stocks, indices, commodities, futures contracts, CFDs, options trading, etc.

Interactive Brokers also takes pride in offering one of the industry’s best trading platform that brings all of the options in one place. You can trade options, buy future contracts or do CFD trading from the same platform. In addition to that, there are other services available for the investors as well such as the Investor’s Marketplace. It is an award winning online brokerage service that has been around for 40 years now. The overall trades taking place using its platform are said to be around 800,000 on any given day today.

Interactive Brokers Bitcoin Futures Trading

Cryptocurrencies are still new in the market. Oftentimes, there is an aura around them that keeps the traders, new ones and experts, a bit reluctant to trade them. However, after more than five years, cryptocurrencies have reached a point where you can say that there are here to stay. It only makes sense for the big brokers on the internet to offer some way for traders and investors to invest in cryptocurrency market as well. Since Bitcoin is the cryptocurrency that has been around for the most years and is considered the most reliable digital coin as well, Interactive Brokers has started to offer futures trading on it.

Today, traders and investors can use Interactive Brokers trading platform to buy Bitcoin futures contracts. At the moment, this services is available only on two of the exchanges CME (Chicago Mercantile Exchange, and CFE (Cboe futures Exchange). On both exchanges, the futures will be having their own symbol as well. GXBT will be the ticker symbol for Bitcoin futures on CFE whereas on the CME, it will be BRR. This particular milestone has already been achieved by the company in the December of 2017. There are a few restrictions on these trades at the moment due to the volatile nature of the cryptocurrency market.

Before going further into the depths of Bitcoin futures, let’s understand what the futures are all about. This basic information will be helpful for any new traders who wish to join the Interactive Brokers platform.

Futures Trading

Futures trading is something that people can often confuse with options trading because there are definite similarities in them. The first thing you have to know about futures contracts is that when you agree to buy or sell them, you are under an obligation. On the other hand, the “obligation” part does not apply in options trading. The basic concept of futures trading is that you decide a future trade on which you hold yourself obligated to sell or buy a particular asset. At the time of deciding the deadline, you also agree to a specified price at which you will purchase or sell the asset.

When the specified date arrives, you have to sell or buy the asset at the price you agreed. So, here is a plain example to make the concept clearer to the readers.

You go into a futures buying agreement i.e. you agree that you will purchase the asset XYZ at $80 on the specified date from the seller. Now that you have entered the agreement, you would hope for the price of the asset to rise in future. Let’s say the price does rise and now the asset is selling at $100. That’s where you will benefit from the trade. While the rest of the market is purchasing the asset XYZ at $100, you will buy it from the seller for $80 as per the agreement. Your benefit will be $20 on every share of the asset you agreed to purchase at $80 on the specified date.

Details of Trading BTC Futures with Interactive Brokers

If you have understood futures trading carefully, you would know that futures trading comes with quite a few risks for Interactive Brokers. First, Interactive Brokers should be given credit for bringing a new trading instrument for its investors and traders despite the associated risks. However, the company is doing its best to keep things as balanced as possible. When this option was introduced by the company, you could not go short on your sales. What it means was that you could not sell the asset on the exchange to buy it later. The reason for this limitation was the volatility of cryptocurrencies.

However, buying the short position is now possible for traders and investors. On the CFE exchange, the commission per contract (all in) will be $5.51. One must keep in mind that on this particular exchange, each contract will only be 1BTC. On the other hand, one contract will consist of 5BTC on Chicago Mercantile Exchange. In addition to that, the per-contract all-in commission will be higher at $15.01. In order for the traders to enter the bitcoin futures trades, they will first have to enable it in their accounts.

There is a trading permission page on which the trader can enable or disable the option to sell or buy BTC futures. Individuals who have accounts with Interactive Brokers and futures trading is already enabled on their accounts will not need to activate this option. Only the traders who do not have “futures trading” enabled on their accounts will need to go through this extra step. The approval for futures trading can be given upon request and requires nearly a day to complete.

Another important thing is for the residents in Japan. If you are an Interactive Brokers trader from Japan, you will not be able to do bitcoin futures trading. Furthermore, you are not allowed to conduct this type of trade using an IRA. You also have to pay attention to the margin requirements before you go ahead and start trading BTC futures. When it comes to outright margin, it will be different for the two exchanges because of the difference in their contract sizes. Calculating from lead month settlement price from the previous month, going into a long position will require a margin of at least 50% of the trade.

Going short is still going to be challenging and only the accounts with a lot of tolerance can go short on their BTC futures trades. If you are trading on CFE, you will have to maintain a margin of at least $40,000 to conduct the trade. You already know that the contract size on CME is five times larger than that on CFE. For that reason, you will have to maintain a margin of at least $200,000 before you can go short on your trades on CFE.

Why Such Huge Margins on Short Positions?

It might need further explanation to satisfy the traders on the issue of margins on short positions. Yes, the margin requirements might seem steep at first, but as soon as you realize the risk of the broker, you will find them justifiable. If you sell a contract to buy it back at a later date, you profit from the rising price of that asset. If the price of the asset rises significantly, you buy it back at a much lower (and agreed upon) price at the time of entering the contract. Now, you have to look at the volatility of Bitcoin to understand the risk of the broker.

Let’s take the example of the rise in the value of Bitcoin in the previous year. If you translate the increase in the value of Bitcoin in 2017 in terms of percentage, it rose by 3,300%. Take a look at the market and you will not find any asset anywhere that can beat that volatility. These are the figures for one year. What makes matters worse is that it can go up and down hugely within the matter of hours. Within 24 hours, Bitcoin’s value can easily go up or down by 20%. That 20% is huge considering the value of this currency which makes 1BTC equal to several thousand US dollars.

Despite the fact that Interactive Brokers is allowing you to go short or long on your BTC futures, it has mentioned clearly on its website that only selective traders will be accepted for this program. Not every trader is going to be able to conduct these trades. Despite the initial limitations, the response from the traders was huge, which pushed the broker to remove those limitations later on.

Reasons to Trade with Interactive Brokers

There are more reasons for you to trade with Interactive Brokers than there are to trade with any other online broker. Let’s take a look at only the major three reasons.

The Platform

Talk to the customers who are already trading on Interactive Brokers’ trading platforms and they will tell you that there is nothing better than this. The platform brings all your trade activities in one place and makes account management a breeze. In addition to that, it is available for you in every form so you can pick the format that suits you the most. It is available in the downloadable for desktops and mobile devices. Furthermore it is available in web-based form so you can access from anywhere at anytime without requiring any downloads.

The Safety

A lot of brokers talk about your safety as a trader while trading with them, but their promises are only strings of words. They have nothing to back up their claims of being safe. On the other hand, Interactive Brokers is the safest platform for you to do reliable trading. It is regulated by the financial regulating authorities in a bunch of countries. Most importantly, you have SEC (Securities and Exchange Commission of the US) regulating it in the US.

Tradable Assets

Interactive brokers gives you the autonomy that no other broker can offer online today. Whether you are a new trader looking for enough options to make your favorite pick or an experienced investor looking forward to diversifying your investment portfolio, Interactive Brokers will help you. It allows you to trade forex, stocks, commodities, indices and much more. In addition to that, you can do futures trading, options trading, CFD trading, etc. Not to mention, you can now do BTC futures trading – something that you won’t easily find elsewhere.

Final Thoughts

The initiative of allowing traders to now buy and sell BTC futures contracts shows that Interactive Brokers is one of the biggest and the best online brokers around the world. When you use its platform for trading, your options are virtually unlimited. Not to mention, you always know that you are associated with a reliable broker that gets regulated by world’s biggest regulating authorities like SEC. As for affordability, Interactive Brokers is known for charging out extremely small commissions on your trades. If you really want to make the best of your hard earned money, Interactive Brokers’ award winning trading platform is definitely the recommendable route for you to pick.


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