CME Group to Launch Options on Ethereum Futures Ahead of the Merge

Key Insights:

• CME Group plans to launch futures options sized at 50 ETH per contract. 
• The contracts act as legal agreements to buy or sell ETH at a future date.
• The company’s average daily trading volume for ETH futures increased by 7% from June to July this year. 

Chicago-based derivatives exchange CME Group is planning to launch options trading for its Ethereum (ETH) futures products next month.

The company confirmed that subject to regulatory review, it plans to launch the options, sized at 50 ETH per contract, just days before the long-awaited Merge upgrade to the Ethereum network takes place.

ETH Futures Contracts

The futures options are expected to start trading on September 12 this year following regulatory approval. More specifically, the Ethereum options contracts will allow investors to place a bet on the price of ETH since they act as legal agreements to buy or sell ETH at a future date.

Overall, Ethereum futures derive their value from ETH, the world’s second-largest cryptocurrency and are often used to hedge against its price changes. Investors will also get a chance to speculate on the asset’s underlying trend and purchase if they expect prices to rise, or take a short position when prices fall. The new contracts will track the CME CF Ether Dollar Reference Rate.

As well as plans to offer options on Ethereum futures, CME Group, which consists of the Chicago Mercantile Exchange, Chicago Board of Trade, New York Mercantile Exchange and the Commodity Exchange, already offers Bitcoin (BTC) options trading products and micro-sized options contracts. The micro Bitcoin and Ethereum options are sized at 10% of a BTC or ETH token, while Bitcoin futures are sized at 5 BTC per contract.

CME Group offers futures and options on futures trading through the CME Globex platform, fixed income trading via BrokerTec and foreign exchange trading on the EBS platform.

Trading Volume Growth

CME Group, which enables clients to trade futures, options and cash, noted that its standard and micro-sized Ether futures contracts have experienced huge growth recently. In particular, the average daily trading volume of ETH futures from June to July this year increased 7%, while micro ETH futures rose by 41%.

What’s more, the firm claims to offer the widest range of global benchmark products across all major asset classes based on interest rates, equity indexes, foreign exchange and agricultural products, in addition to operating one of the world’s leading central counterparty clearing providers, CME Clearing.

The company’s Global Head of Equity and FX Products, Tim McCourt confirmed that CME Group has traded more than 1.8 million contracts to date. McCourt added that the firm expects to see significant interest in the new options contracts owing to the upcoming Ethereum Merge.

McCourt also cited the Ethereum blockchain’s upcoming transition to a proof-of-stake (PoS) consensus mechanism as a potential reason for the increase in trading volume.