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.  

Today's Future Price Action

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