At-a-Glance
Key Takeaways with Craig
Due to scheduling conflicts today, we are using the Key Takeaways section to showcase one of CME’s newer Micro Options products rather than for a market recap. Specifically, we’re going to take a closer look at the Micro Ether Options.
Micro Ether futures (MET) have a contract multiplier of .1 Ether which means that if a trader were to buy one MET, they would assume the notional exposure of 1/10 of one Ether or, at today’s prices, about $195 worth of Ether exposure. This is in contrast to the standard sized Ether futures contract which as a notional value of 50* current Ether price. Therefore, the MET provides a user with greater flexibility and customization in terms of the exposure they wish to assume to the price of Ether.
Similarly, because MET is the underlying instrument to Micro Ether Options, the options provide similar flexibility in terms of desired notional size. For example, if we take the mid-point of the bid/ask in the Calls and Puts in the Micro Ether Options that expire in 9 days, the value the market is placing on the straddle is currently:
- Call = 91 | Put = 97 | Straddle = 188
- Because these have a multiplier of .1, in US Dollar terms, this straddle is trading at about $18.80
- While this is a relatively small notional, especially versus many other CME products, if a user were to buy 5 straddles instead, it would be $94, 10 would be $188 and so on.
So, if a trader wished to assume a Long Delta position in Ether by selling option premium because, for example, they thought implied volatility would decline and the price would rally, they could sell a vertical Put spread.
Let’s say with Futures trading at 1955, a trader sold the 1925 Put and, because they wanted to limit the max loss on the trade, the bought the 1850 Put expiring in 9 days. This trade would effectively give them the following theoretical exposure:
- Overall Delta at trade initiation = 12 (43 Delta 1925 minus 31 Delta 1850)
- And they would collect $2.70 for each spread they executed
- If they did 10 Spreads they would collect $27, 100 spreads would be $271 etc.
So, if our trader executed 50 of the above spread, they would initiate a position with a max profit (excluding fees and commissions) of about $135.00 and a max possible loss on the trade of about $240.00.
Though the decimal is off on the QuikStrike image below, we wanted to show the QuikStrike analysis and P&L graph of the hypothetical trade we just went through.
While a relatively simple and high-level explanation of the hypothetical trade, we hope it provides some insight as to the flexibility that these options provide users.
Todays Featured Videos
Today's Future Price Action
Traders Resources
The information in the market commentaries have been obtained from sources believed to be reliable, but we do not guarantee its accuracy and expressly disclaim all liability. Neither the information nor any opinions expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts. The information on this site compiled by CME Group is for general purposes only. All information and data herein is provided as-is. Additionally, all examples on this site are hypothetical situations, used for explanation purposes only, and should not be considered investment advice or the results of actual market experience. CME Group assumes no responsibility for any errors or omissions. CME Group, its affiliates and any third party information and content providers expressly disclaim all liability with respect to the information and data contained herein including without limitation, any liability with respect to the accuracy or completeness of any data. You use the data herein solely at your own risk. All data and information provided herein is not intended for trading purposes or for trading advice. All matters pertaining to rules and specifications herein are made subject to and superseded by official CME, CBOT, NYMEX and COMEX rules. Current rules should be consulted in all cases concerning contract specifications.
Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Due to the leveraged nature of futures trading and swaps trading, it is possible to lose more than the amount deposited in a position. Therefore, traders should not deposit more funds than they can afford to lose without negatively affecting their lifestyles. A trader cannot expect to profit on each trade, and should only devote a small amount of their available funds to each trade. All references to options refer to options on futures.
Past performance is not necessarily indicative of future performance.
CME Group, the Globe Logo, Chicago Mercantile Exchange, Globex and CME are trademarks of Chicago Mercantile Exchange Inc. CBOT is the trademark of the Board of Trade of the City of Chicago, Inc. NYMEX is the trademark of the New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. All other marks are the property of their respective owners. Each of Chicago Mercantile Exchange Inc. (ARBN 103 432 391), The Board of Trade of the City of Chicago Inc (ARBN 110 594 459), the New York Mercantile Exchange Inc (ARBN 113 929 436) and Commodity Exchange, Inc. (ARBN 622 016 193) is a registered foreign company in Australia and holds an Australian market licence.
This site does not constitute a prospectus, product disclosure statement or legal advice, nor is it a recommendation to buy, sell or retain any specific investment or to utilise or refrain from utilising any particular service. Readers should consult their legal advisors for legal advice in connection with the matters covered on this site.
