Ethereum Futures Trading
Patiently awaiting regulatory approval, the Chicago Mercantile Exchange (CME) introduced Micro Ether futures on December 6, 2021. From February 2022, Ethereum futures trading started to gain momentum, and now it is a widely traded financial instrument.
You’ve come to the correct place if you’re curious about ether futures and want to learn more about trading them. This article will examine and explain how to trade ether futures.
What are Ether Futures?
Ether futures are legal agreements or contracts where Ether may be bought or sold at a future date. The value of Ether’s future is derived from Ether, the world’s second most ranked cryptocurrency in its market capitalization.
Functions of Ether Futures
Ether futures are frequently used as a hedge against fluctuations in price. In other words, you open a long position (buy) when you expect Ether futures price to rise. And you take a short position (sell) when the price falls to mitigate the impact of loss.
Benefits of Trading Ether Futures
Ethereum futures trading offers the following benefits:
The price of Ether can be speculated even by non-Ether holders for a profit. Furthermore, you can start trading in an Ether futures contract with USDT, and any gains will be settled in USDT.
You can be exposed to the risk of Ether at a fraction of its total cost. Leverage offers you to make a substantial profit as small price movements can be amplified with it.
Markets of Ether futures are extremely liquid, with trading volumes ranging in trillions. As a result, traders can easily enter and exit their positions with minimal slippage as it is less risky with the market’s liquidity.
- Portfolio diversification:
To generate more profits, traders are diversifying trading strategies. For example, traders use sophisticated trading strategies like pairs trading, short-selling, arbitrage, etc.
Types of Ether Futures
There are mainly two types of Ether futures: Ether future perpetual and Ether futures quarterly.
Ether future perpetual: Unlike standard futures, these contracts don’t have a set delivery date, allowing them to be kept forever without the requirement to roll over contracts as they expire.
Ether futures quarterly: These have a limited lifespan, expiring every quarter.
A closer look at Ethereum futures contracts
Ethereum futures are a contract where the buyer and the seller enter into a predetermined price of Ethereum at a predetermined date. You make a profit if you have gone long, and at the end of the contract, the price of Ethereum is equal to or above the predetermined price.
You make a profit if you have gone short, and at the end of the contract, the price of Ethereum is equal to or below the predetermined price.
Risks involved with Ethereum futures trading
Although using leverage has a huge advantage over the futures trading market, you are bound to make losses if you misinterpret the market. Therefore, novice users should avoid such trading until they have completely understood and gained sufficient knowledge of the market before trading.
Ether futures are driven by a high degree of speculation; thus, a small mistake can prove costly. However, the contract risk comes from its utility and design, not from the contracts themselves.
However, to mitigate the loss, traders utilize the stop-loss feature; thus, if you, as a beginner, wish to enter Ethereum futures trading, you too can use the stop-loss feature before opening up a position.
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Frequently Asked Questions
Like any new product or service, it needs articulation once the customer demand is strong. Thus Exchanges decided to launch Ether futures. Now, Ethereum is the second most ranked cryptocurrency based on market capitalization and daily volumes. Moreover, by generating a forward curve with ether futures on a regulated, well-established exchange, investors can reduce risk exposure in the ether cash market and better manage price risk.
The basis for Ether futures is the Ether-Dollar Reference Rate, or ETHUSD RR, which collects ether trading activity from the biggest spot exchanges between 3:00 and 4:00 pm, London time.
Ether futures are listed across several exchanges including Blockchain Tradein.
whether the coin can move higher. Even if that is gradually taking place, it has not yet been ne
The value of a single Ether futures contract is expressed in US dollars per Ether and is 50 times that of the Ether-Dollar Reference Rate Index (ETHUSD RR).
Ether futures are available to traders throughout five days of the week and 24/7 via a virtual medium.Ether futures are available to traders throughout five days of the week and 24/7 via a virtual medium.
While some exchanges may not initially not include options; however, as the futures market matures and customer demand changes, they may reconsider adding options. However, you can find platforms that offer 24/7 Ether futures options.
On the day the futures contract expires, at 4:00 pm London time, the final settlement value is calculated using the Ether-Dollar Reference Rate.
Block transactions are permitted for Ether futures, subject to certain reporting requirements. Five contracts are the required minimum block threshold.
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