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While CME is launching its ETH options trading, the short ETH calls in the derivatives market have picked up significantly as traders are hedging the spot calls.
On Monday, September 12, derivatives marketplace Chicago Mercantile Group (CME) announced its decision to launch ETH options trading. The announcement comes just two days ahead of the launch of Ethereum Merge, the most-awaited event of 2022.
CME ETH Options
CME is one of the world’s leading derivatives marketplace and has been in the crypto space for a while. The CME options contracts will deliver one Ether future at 50 ETH per contract. Options are a crucial trading instrument that allows institutional players to hedge risks or gain exposure to the asset class. The CME Group has a strong infrastructure backing this product. Speaking on the launch, Tim McCourt, Global Head of Equity and FX Products, CME Group said:
“As market participants anticipate the upcoming Ethereum Merge, a potentially game-changing update of one of the largest cryptocurrency networks, interest in Ether derivatives is surging. The launch of our new Ether options contracts is particularly well-timed to provide the crypto community with another important tool to gain access to and manage exposure to ether. Our new options contracts will also complement CME Group’s Ether futures which have seen a 43% increase in average daily volume year over year.”
Following weeks of optimism, the ETH price has been trading under pressure in the last two days. As of press time, ETH is trading 2% down at a price of $1,712 with a market cap of $208 billion.
Shorting Ether in Derivatives Market
Many crypto market analysts believe that the Merge event could be a “sell the news” event for Ether (ETH). As per data from crypto firm Kaiko, the funding rate for Ethereum perpetual futures contracts has tanked sharply over the last weekend.
It means that traders have been shorting ETH in the derivatives market as the funding rate touch a one-year low. Andrew Tu, head of growth for crypto algorithmic-trading firm Efficient Frontier told Bloomberg:
“With the Merge happening this week, it could be that folks are hedging as the price of ETH has mostly increased while funding rates have gone negative”.
A lot of traders are also hedging their long spot positions by shorting ETH in the derivatives market. “Investors in the perpetual futures market broadly agree that most of Ether’s positive fundamental catalysts have already been priced, with little further upside expected following the Merge,”said Gabriel Selby, lead research analyst at crypto exchange Kraken-owned CF Benchmarks.