Interest in Ether Options Rises to Record as Traders Bet on 'Merge'

"A few hedge fund names have been large buyers of the ETH calls," one trading firm noted.

AccessTimeIconJul 28, 2022 at 11:27 a.m. UTC
Updated May 11, 2023 at 5:28 p.m. UTC

The number of open positions in ether's (ETH) options market has reached a record high as an updated timeline for Ethereum's long-awaited supposedly bullish "merge" has spurred demand for call options.

  • Open interest – the number of options contracts traded but not squared off with an offsetting position – stood at a new lifetime peak of nearly 4 million, according to data from major exchanges, including Deribit, tracked by Swiss-based derivatives analytics firm Laevitas. The previous peak of around 3.5 million was registered in the second quarter.
  • "The desk has traded an incredible amount of ETH calls this week, over 250,000 ETH notional," the Singapore-based options trading giant QCP Capital noted in a Telegram chat.
  • "A few hedge fund names have been large buyers of the ETH calls and the overwhelming demand has brought September volumes up to 100%," the trading firm said, adding, "We expect this demand to continue as we approach the merge in September."
  • Martin Cheung, an options trader from Pulsar Trading Capital, said, "There are big players in September and December expiry, betting on an upside in ether."
  • Recently, the spread between prices paid for puts relative to calls has narrowed sharply, indicating renewed demand for calls.
  • A call option gives the purchaser the right but not the obligation to buy the underlying asset at a predetermined price on or before a specific date. A call buyer is implicitly bullish on the market. A put option represents a bearish bet.
  • The optimism has returned to the ether market ever since Ethereum developer Tim Beiko announced Sept. 19 as a tentative date for the completion of the merge.
  • As the name suggests, the upgrade will merge Ethereum's current proof-of-work blockchain with a proof-of-stake blockchain called the Beacon Chain, which has been running since 2020. The transition is considered bullish for ether.
  • "We’re big fans of Ethereum as an asset. Lately we’re bullish on the idea that the merge will create a wave of price appreciation after creating strong deflationary pressure (in the form of structural demand)," Jack Niewold, founder of the Crypto Pragmatist newsletter, wrote in Wednesday's edition.
  • "While inflation in global economies remains at high levels, ETH will likely become the largest deflationary currency [after the merge]," Lucas Outumuro, head of research at IntoTheBlock, said in a research report published on July 23. "The amount of ether issued will drop by approximately 90% as it will no longer be needed to incentivize miners."
  • Ether traded at $1,620 at press time, representing a 50% gain for the month, according to CoinDesk data.
The number of open ether options contracts is surging ahead of Ethereum's merge, expected in September. (Laevitas)
The number of open ether options contracts is surging ahead of Ethereum's merge, expected in September. (Laevitas)


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Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.