CME Group to roll out options on Ether futures next month

abdelaziz Fathi

Derivatives exchange CME Group is set to roll out options on Ether futures on September 12 in a move to bring another level of diversification to cryptocurrency traders.

CME’s Ether options are currently being reviewed by regulators, and the exchange operator confirmed that once the addition clears, they will be available for purchase.

Chicago-based CME has offered more insights about its newest crypto derivatives. The options on Ether futures will be priced off at the CME CF Ether-Dollar Reference Rate, an index that was developed in partnership with Crypto Facilities to provide real-time ether price in dollars. The index references pricing data using transactions and order book activity from several cryptocurrency exchanges.

These new contracts deliver one ether futures, sized at 50 ether per contract. Additionally, the exchange operator touts the benefits of new option contracts as the potential to save on margins, through margin offsets.

CME Group has been reviewing client demand and crypto traders’ interest in Ether derivatives after launching its index tracking prices of the second-largest cryptocurrency. These new contracts will also expand CME Group’s existing suite of Cryptocurrency options contracts, which include Bitcoin options, as well as micro-sized Bitcoin and Ether options.

“The launch of these new options contracts builds on the significant growth and deep liquidity we have seen in our existing Ether futures, which have traded more than 1.8 million contracts to date,” said Tim McCourt, Global Head of Equity and FX Products, CME Group. “As we approach the highly anticipated Ethereum Merge next month, we continue to see market participants turn to CME Group to manage ether price risk. Our new Ether options will offer a wide array of clients greater flexibility and added precision to manage their ether exposure ahead of market moving events.”

With extra regulatory safeguards, CME Group introduced Bitcoin futures in December 2017, marking a major step in the path to legitimatizing the cryptocurrency. Earlier last year, it launched options on its Bitcoin futures contracts, a sign of its growing commitment to Cryptocurrencies.

The Chicago-based venue was not the only exchange to try to capitalize on the crypto frenzy as Cboe pioneered with its own cash-settled bitcoin contracts. However, Cboe decided earlier in 2020 to discontinue its bitcoin futures trading activities. On the other hand, CME pressed onward with new crypto products.

Both futures and options are a way for investors to bet on the trends of a cryptocurrency price without having to actually hold the underlying coin, which skirts regulatory and custodian issues. However, futures are, in general, riskier than options as the only financial liability for the latter is the premium paid at the purchase time. On the other hand, futures contracts involve maximum liability.

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