Finance

Everything You Must Know About Micro Ethereum Futures Contracts

Contracts for future delivery of Ether give investors the ability to bet on the value of this cryptocurrency without requiring them to hold any Ether. Such futures contracts are controlled and offer traders the option to speculate or mitigate risk against price fluctuation in Ether. Traders can benefit from both of these opportunities.

What are the Micro Ethereum Futures Contracts?

Micro Ether futures are available at CME Group, a regulated derivatives marketplace that is also home to Bitcoin futures and options. These futures serve the same function as the larger Ethereum futures contract, although with a lower required investment amount. Micro Ethereum futures, also known by their ticker symbol MET, are cash-settled USD contracts that are based just on CME CF Ether-Dollar Reference Rate (ETHUSD RR). This rate is used as a once-daily reference rate for the price of just one ether in US dollars as of 4:00 p.m. London time. Micro Ether futures are very similar to the larger-sized contract.

The administrator of the Ether Dollar Reference Rate compiles the trade volume of the most important ether spot exchanges once every day during the computation window that lasts for one hour. Following the division of this one-hour window into 12 intervals of 5 minutes each, the Ether Dollar Reference Rate is computed by taking an equally balanced average of the volume-weighted medians of any 12 partitions. This results in the Ether Dollar Reference Rate.

CME has been trading BTC futures for quite some time and will diversify its product offering by adding ETH futures in March of 2021. Traders now have a new option at their disposal, thanks to a new product that gives them exposure to the two most significant cryptocurrencies.

Ethereum futures contracts are a type of derivative instrument in which two parties enter into a binding agreement to buy or sell a certain item (often a commodity) at a future date and price that has been predetermined by the parties involved. They are frequently used to hedge against the price movement of such underlying assets to reduce the risk of incurring losses as a result of unfavorable price movements.

Similarly, micro Ethereum futures contracts function in the same manner as conventional futures contracts; however, the CME Group uses a multiplier that is one-tenth the size of a standard contract.

Options with micro put and call prices provide more maneuverability

The micro Ethereum futures contracts offered by the CME on the most prominent cryptocurrencies are each equal to one-tenth of the value of one ether and one-tenth of the value of one Bitcoin.

Both the basic Bitcoin contract offered by the CME as well as the Ethereum contract offers a total of fifty ether tokens and five bitcoins, respectively. As a result of the micro contracts’ contribution to an overall rise in market liquidity, a greater number of market participants are now able to engage in futures trading and investment. Put option options just on micros boost liquidity in the market by giving additional flexibility and a greater number of alternatives for trading or investing.

Put and call option values are mostly determined by the underlying asset’s implied volatility. Given the high amount of historical volatility in cryptocurrencies, it is reasonable to expect that options contracts upon smaller micro contracts will garner a strong interest, in addition to generating a lot of trading volumes.

Smooth trading with the right decisionsĀ 

Trade on such a regulated exchange in which all participants have seen the same pricing and quotations on contracts settled towards the CME CF Ether-Dollar Reference Rate. CF Ether-Dollar Reference Rate.

Micro Ethereum futures are the latest addition to the growing family of cryptocurrency products offered by CME Group. These futures provide an additional option for discovering prices and managing risks within the increasing ether ecosystem.