Cboe BZX files to offer options on spot Ethereum ETFs

The Cboe BZX Exchange has proposed listing and trading options on spot Ethereum exchange-traded funds (ETFs). This move follows a similar filing by NYSE American, which is currently under review by the Securities and Exchange Commission (SEC) and positions Cboe BZX in direct competition for this emerging market.

The rule change, which is a proposed amendment to Rule 19.3, specifically identifies several Ethereum ETFs as the potential underlying assets of the options contracts, including the Bitwise Ethereum ETF, the Grayscale Ethereum Trust, the Grayscale Ethereum Mini Trust, and “any trust that holds ether.” That is fairly broad language, and it indicates that Cboe BZX is looking to enable options trading on just about any Ethereum-backed investment vehicle.

Cboe BZX pushes for Ethereum ETF options after Bitcoin success

The filing states that Rule 19.3 currently allows options trading on fund shares tied to specific investments, like financial instruments, money market assets, precious metals (considered commodities), and Bitcoin (a cryptocurrency also classified as a commodity). Ethereum funds work similarly—they are Ethereum-backed ETFs set up as trusts.

“The Exchange believes that offering options on the Ethereum Funds will benefit investors by providing them with an additional, relatively lower cost investing tool to gain exposure to spot ether as well as a hedging vehicle to meet their investment needs in connection with ether products and positions,” Cboe BZX wrote in the filing.

The move comes after the successful launch of options trading on spot Bitcoin ETFs in November 2024. Options and derivatives provide liquidity and price discovery for larger institutions, exposing them to the underlying asset’s price action. 

Ethereum ETF trading volume hits $1.5B as market reacts to tariffs

Several big institutions typically use options as a trading hedge, while retail traders use options for speculation. Options on spot ETFs could ease Bitcoin price volatility in the long run by increasing market liquidity.

On Monday, US spot Ethereum exchange-traded funds (ETFs) surged to a record $1.5 billion in trading volume, a 23% increase from the previous high of $1.22 billion on Dec. 19, 2022. This spike came as the crypto market reacted to President Trump’s new trade tariffs, which sent Ethereum plunging nearly 36% to $2,100 before rebounding to $2,819.

The introduction of options trading could increase the market liquidity of Ethereum ETFs. Hedge and risk managers manage their positions, and institutional traders find options valuable. At the same time, it can decrease price volatility over time by improving price discovery mechanisms and increasing derivatives trading.

At press time, Ether is changing hands near $2,750 and has fallen by more than 1.35% in the past 24 hours. However, the trading volume has also decreased by 18.50% at the same time, which may suggest that fewer traders and investors are participating in the market due to high volatility.

Cryptopolitan Academy: How to Write a Web3 Resume That Lands Interviews - FREE Cheat Sheet