Derivatives Leader CME To Roll Out Ether Options Ahead Of Upcoming Merge Upgrade

Options for Ethereum (ETH) futures are coming to the world’s leading derivatives marketplace, Chicago Merchantile Exchange (CME). The futures options will be launched next month — just days before the most significant upgrade in the history of Ethereum goes live.

Managing Ether Price Risk

The CME Group has announced that it intends to launch options trading for its existing Ether futures. The Chicago-based derivatives exchange made the announcement today, explaining that the options will be sized at 50 ETH per contract.

The launch of the ether options is contingent on CME receiving regulatory approval for this product. Assuming regulators grant CME’s application, trading the new ETH contracts should commence on September 12.

For the uninitiated, futures contracts dictate that traders have to buy or sell the underlying asset at a specific price on the expiry date. On the other hand, options contracts give the investor the right but not the obligation to buy or sell the underlying asset at any given price at any time before the expiration of the contract. The new ETH options would allow holders to bet on the future price of ether, and they can cash out any time, even before the contract expires.

Previously-issued ETH futures and micro-sized ETH futures options, CME said, have become attractive investment vehicles that bring “consistent liquidity, volume, and open interest for clients” as the Merge fast approaches. For instance, the open interest in Micro ETH futures surged by over 33% from the first quarter to the second fiscal quarter of this year.

CME Group Global Head of Equity and FX Products Tim McCourt opined: “As we approach the highly anticipated Ethereum Merge next month, we continue to see market participants turn to CME Group to manage Ethereum price risk.”

“Our new Ethereum options will offer a wide array of clients greater flexibility and added precision to manage their Ethereum exposure ahead of market moving events,” he continued.

The Merge is the much-anticipated upgrade that will mark the end of the energy-intensive proof-of-work (PoW) consensus mechanism for the Ethereum blockchain. It is tentatively expected to land on September 15 or 16.

While Ethereum will become 99.95% more energy efficient (unlike bitcoin, which is often criticized for not being green), the Ethereum Foundation recently clarified that the transition from proof-of-work to proof-of-stake will not reduce the network’s notorious gas fees. This also means that Ethereum transactions will also not be noticeably quicker post-Merge. 

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