Options on bitcoin futures just launched. Here's what you need to know

Christophe Morin | Bloomberg | Getty Imagesoptions launched Monday on the Chicago Mercantile Exchange.

Traditional options allow the buyer of the option to purchase the underlying asset in the case of a call option or sell the underlying in the case of a put option. Options on futures are just a bit different in that the owner of a call option has the right at option expiration to take a long position in the bitcoin futures contract traded at the CME, while the owner of a put option has the right to take a short position in those bitcoin futures.

Options on bitcoin futures are implying an extreme amount of volatility. Just after midday on Monday, the $8,000-strike put options expiring in April were trading at 72% implied volatility, suggesting that traders believe bitcoin is likely to be between $6,965 and $9,940 when those April options expire. That's a range of 37% with bitcoin futures at $8,130.

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