Why The CME Will Launch Ethereum Options Ahead Of “The Merge”

The Chicago Mercantile Exchange (CME) Group will launch Ethereum option contracts on its platform on September 12. The company announced that it’s waiting for regulatory review, and if approved, these new investment products will join its ETH futures and mini futures contracts.

The new option contracts will be offered at a size of 50 ETH per contract and will track the CME CF Ether-Dollar Reference Rate, the press release confirmed. In addition to its Ethereum-based products, the CME offers Bitcoin options, futures, and micro-sized options contracts.

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The new Ethereum options will rollout days before “The Merge” is launched on mainnet. This event will mark ETH’s transition from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus, setting the stage for an alleged massive reduction in energy consumption and the potential to implement scalability and performance updates.

Tim McCourt, Global Head of Equity and FX Products for the CME Group claimed the new ETH option contracts will be deployed on the “significant growth and deep liquidity” displayed by ETH futures. These financial products have traded over 1.8 million contracts since their inception. McCourt added:

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.

Sam Newman, Digital Assets Head of Brokering at TP ICAP claimed their company is “excited to support CME group” with their new investment product. TP ICAP is one of the world’s largest interdealer brokers and liquidity providers. The company has been a key component in the crypto products launched by the CME. Newman added:

With the upcoming Ethereum protocol merge, we expect this new contract to see significant interest from both our traditional customers as well as crypto native clients. As part of the world’s largest IDB, TP ICAP Digital Assets has supported CME Group’s Cryptocurrency suite since our launch in 2019 and will continue to do so as we move into the next phase of institutional adoption.

CME Ethereum Options Hint At A Top For ETH’s Price?

Data from the CME indicates that the Ethereum futures contracts available on the platform recorded an average daily volume of around 8,000 contracts in July with an Open Interest of 4 contracts. Possibly hinting at the hype generated by “The Merge”, the sector saw a 7% uptick when compared to their June metrics.

On the latter, the Ethereum futures on the CME for their Q2 2022 saw a 27% increase with respect to their Q1 2022 metrics. ETH micro futures have seen more growth with 47,800 traded contracts over the same period which represents a 34% increase over their Q1 2022 metrics.

As the news about the ETH CME options broke, some crypto investors speculated on the potential negative impact on Ethereum’s price. The launch of these ETH options contracts will converge with an event likely to play as a “buy the rumor, sells the news” trade.

At the time of writing, ETH’s price trades at $1,860 with sideways movement on low timeframes.

ETH’s price moving sideways on the 4-hour chart. Source: ETHUSDT Tradingview

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