Cboe Wants to Bet on Ethereum: Options Trading Gets Crypto Twist
Published Date: 2/13/2025
Notice
Summary
Cboe BZX Exchange wants to start offering options on the Fidelity Ethereum Fund, letting investors trade new types of contracts tied to this popular crypto fund. This change affects traders and investors looking for fresh ways to invest in Ethereum through a trusted fund, with the proposal now open for public comments before it goes live. If approved, it could bring more excitement and money moves to the market soon!
Analyzed Economic Effects
5 provisions identified: 3 benefits, 1 costs, 1 mixed.
Options on Fidelity Ethereum Fund
The Exchange filed on January 24, 2025 (Amendment No. 1 on February 3, 2025) to list options on the Fidelity Ethereum Fund. If approved, investors will be able to trade options tied to the Fidelity Fund, which began trading July 23, 2024 and had 41,700,000 shares outstanding as of December 23, 2024.
Listed Options vs OTC Benefits
The Exchange says listed Fidelity Fund options would let investors trade in a listed market instead of the unregulated OTC options market. Listed trading offers increased transparency, faster execution, and OCC clearing that guaranties option obligations.
25,000-Contract Position Limit
The Exchange proposes position and exercise limits of 25,000 same-side option contracts for Fidelity Fund options. The filing states 25,000 contracts could equate to 2,500,000 shares (about 6.0% of the 41,700,000 outstanding shares) and a value of $85,925,000 using a $34.37 share price as of December 23, 2024.
Settlement Style, Expirations, Strikes, Increments
Fidelity Fund options would be physically settled, American-style contracts and may be listed with weekly, monthly, quarterly expirations or LEAPS (12–39 months). Strike intervals will be $1 for strikes $200 or less and $5 for strikes over $200; minimum quoting increments are $0.05 for option prices under $3.00 and $0.10 for prices $3.00 or higher.
Surveillance and Market Protections
The Exchange will apply existing surveillance and will use Intermarket Surveillance Group (ISG) sharing and a FINRA regulatory services agreement to monitor trading in the Fidelity Fund options for manipulation. The filing cites coordination with CME surveillance and prior Commission findings about correlation between CME Ethereum futures and spot Ethereum markets.
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