CME Group Rolls Out Ether Options for Upcoming Merge

CME Group, a leading derivatives marketplace, has launched the options of Ether futures, given that the much-anticipated merge has been pushing demand.

Tim McCourt, the global head of Equity and FX products at CME Group, pointed out:

“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.”

Since the merge is slated for September 15, CME Group intends to offer more flexibility with the Ether options. Leon Marshall, the global head of sales at Genesis, stated:

“The launch of the new Ether options contract ahead of the highly anticipated Ethereum Merge provides our clients with greater flexibility to trade and hedge their Ether price risk.”

The merge is anticipated to be the largest software upgrade in the Ethereum ecosystem because it will change the consensus mechanism from proof-of-work (PoW) to proof-of-stake (PoS).

Therefore, the new options will complement CME Group’s Ether futures, which have recorded a 43% surge in average daily volume year-over-year. 

Rob Strebel, the head of relationship management for DRW, said:

“As ether transitions through the anticipated merge this week, we expect we’ll continue to see strong demand for this Ether options contract.”

Since the Ethereum merge has been awaited with bated breath by the crypto community, the network’s speculative action has skyrocketed, Blockchain.News. The open interest shown in the ETH network highlighted that buying pressure outweighed selling. 

On the other hand, a hard-fork mechanism is expected to be deployed within 24 hours after the merge. 

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Opinion: How Bitcoin Options Might Help Survival amid the Bear Market?

The Federal Reserve is raising interest rates at the most aggressive rate in nearly 30 years. With inflation at an all-time high and a looming recession, protecting capital is at the forefront of every investor’s mind.


Cash and government bonds were once safe assets during bear markets, but with inflation running amok and central banks struggling to stabilize bond yield curves, these traditional safe havens are looking shaky.

Options contracts can be a good way to hedge some of your risks, as they give you the right, but not the obligation, to trade an asset in the future at a predetermined price. A call option is the right to buy, and a put option is the right to sell.

There are two styles of options contracts. A trader using American-style options can exercise his or her contract at any point during the lifetime of the contract, whereas European-style options can only be executed only at the expiry date.

If it is not profitable to exercise your put or call option at the date of expiry, you can let it expire and take no action. In this scenario, your cost is limited to the amount of money you paid for the options contract when you bought it.

Multiple trading strategies use options contracts. But in this article, I’d like to share some approachable strategies that allow a certain amount of protection without needing to sell your assets.

Let’s take Bitcoin as the underlying asset. If you buy a put option at a strike price equal to or higher than the current price, it gains value as Bitcoin moves lower.

So, if your Bitcoin is in the red, your options contract will be green. And, if the market trends higher, nullifying your option, then Bitcoin will have appreciated covering some of the cost of the contract.

This strategy is best suited to traders who hold Bitcoin as long-term investments and do not wish to sell. This allows them to avoid a worst-case scenario: cascading liquidations that drag Bitcoin down dramatically. Buying a put is like buying insurance for downside risk. 

So, if you suspect a further leg down is on the horizon, you can buy a put option as a type of insurance that pays out should the market move lower. Timing is crucial, especially during a bear market.

For example, if you believe the market will trend lower very quickly in the following days, buying a put may well be worth the initial investment, but if the market moves down slowly. You may not be able to recover the premium you paid to buy the put option. The same principle applies to call options as well.

Another popular use of options contracts is selling call options while holding the underlying asset. You can be paid immediately by selling a call option to another party, giving them the right to buy your Bitcoin should the price increase to or beyond a certain amount.

For example, if you sell a call option agreeing to sell 1 BTC at $30,000, you collect the price of that contract — the premium — right away, which acts as a hedge against the downside. Your only risk would be missing out on any gains beyond the strike price, which would be owned by the buyer of the option.

If Bitcoin doesn’t hit the strike price, then the option expires, and you keep the premium. The main risk with this strategy is that the underlying price of Bitcoin falls in the interim.

The bear market affecting crypto and other capital markets is a time to protect capital, so when the good times return, there will be plenty of opportunities to reallocate. Bitcoin price could whipsaw traders in troubled times. By using the options hedge, you can create a more robust portfolio while still HODLing your Bitcoin stack.

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How should investors value DeFi projects? A new paper might have some answers

A new paper released on Thursday from a team of crypto researchers hopes to add to a body of work that will eventually identify “the Black-Scholes of decentralized finance (DeFi)” — an equation that will allow investors and users to properly value DeFi projects and potential profit/loss metrics in popular DeFi verticals such as liquidity mining. 

Why is such an equation important? At first blush,  liquidity mining is simple enough to explain: in exchange for providing liquidity to automated market makers like Uniswap, users are rewarded with trading fees or governance tokens, often denominated in APY percentages.

However, users suffer “impermanent losses” related to fluctuations in demand for the trading pair, and a simple APY calculation on a user interface frontend isn’t sufficient to paint a full picture for what the gains might look like for liquidity providers. 

According to research from Tarun Chitra, founder and CEO of DeFi risk analysis firm Gauntlet.Network and one of the three co-authors of When does the tail wag the dog? Curvature and market making, liquidity mining is best thought of as a complex derivative.

“Most passive investment products often times have non-trivial derivatives-like exposure. For instance, the collapse of the ETF XIV in February 2018 (“volmageddon“) illustrated how some assets that are “passive” and “safe” have complex exposure,” Chitra explained to Cointelegraph. “Liquidity providing in AMMs is not so different, although it presents a new set of risks to holders. Liquidity providers are always balancing fees earned (positive income) with large price moves losses (negative, impermanent loss).”

These complexities have led to the failure of many liquidity mining projects due to overincentivization (“1e9% APY isn’t sustainable, too many LPs and no traders”), or underincentivization from developers not offering enough rewards to counterbalance impermanent losses. Ultimately, users and developers “should think of farming as a complex derivatives analogue of maker-taker incentives on centralized exchanges.”

Additionally, this new conceptual model may allow for more sophisticated decision making from liquidity providers, as well as more robust architectural frameworks for AMM developers. 

“This paper provides a principled way for developers and designers to provide LP returns that make sense,” said Chitra. “APY only makes sense for fixed income assets (bonds), whereas derivative pricing makes MUCH more sense for something like liquidity provision. We hope this is the first in the line of many works that try to find the ‘Black-Scholes of DeFi.’”

According to Chitra, successfully identifying a DeFi-equivalent to the Black-Scholes model might also be the key to mass DeFi adoption. Developed in the 1980s to help investors find ways to properly price stock options, Black-Scholes led to a massive boom in derivatives trading. 

While it remains to be seen if a new model can cut so cleanly through DeFi’s complexities, this paper appears to be a promising first step.