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October 6, 2025Seeking Alpha logoSeeking Alpha

FETH: Long-Term Bullish Ethereum And Short-Term Downside Protection With The Options Strategy

Summary Ethereum offers both store-of-value and smart contract utility compared to Bitcoin, and also a vast reduction in energy ￰0￱ Ethereum Fund ETF is attractive for its in-house custody and good liquidity, providing a solid option for Ethereum exposure. A covered Call strategy on FETH capitalizes on high implied volatility, offering downside protection and enhanced returns in a consolidating ￰1￱ bullish long-term prospects, prudent position sizing and risk management are essential due to regulatory and security risks in the crypto ￰2￱ Thesis I think that Ethereum, or Ether ( ETH-USD ), is to Bitcoin ( BTC-USD ) like what silver is to gold, with its dual role as a precious and industrial metal, while gold is mostly a store of value.

Historically, silver performed very close to gold, and if gold sometimes increased the gap (like it happened from mid-2024 to mid-2025), silver tended to come back soon (like it happened since mid-2025): Figure 1: Silver Vs Gold Performance (Seeking Alpha) In about the same way, Ethereum has a dual role, store of value and smart contracts platform, while Bitcoin is mostly a store of ￰3￱ in about the same way, Bitcoin led the way in the last three years, benefiting from a first-mover advantage in the ETF space, but again, in about the same way, Ethereum is on its way to close the gap: Figure 2: Ethereum Vs Bitcoin Performance (Seeking Alpha) This happened mostly after Ethereum also gained traction in the ETF space, one of these being Fidelity Ethereum Fund ETF ( FETH ).

I will present my bullish mid-to-long term thesis, which might be enough for a very small ￰4￱ since this does not come without risk, and since Ethereum seems to be waiting for a refueling these months, I will also present an options strategy for some downside ￰5￱ on Ethereum There are two main reasons for a mid-to-long-term bullish view on Ethereum. First, somehow like what silver is to gold, it’s the second cryptocurrency by market cap after Bitcoin, triple compared to the third place Ripple ( XRP-USD ): Figure 3: Ethereum Market Cap (Slickcharts) This gives it high interest from the market, proven by the recently approved ￰6￱ are today in a phase when Ripple might see its first ETFs approved too; we’ll ￰7￱ second main reason is given by the Ethereum smart contracts platform, which are digital programs that automatically execute when predetermined conditions are ￰8￱ their low cost, increased speed, immutability, and transparency, smart contracts are revolutionizing industries like Finance, Real Estate, Healthcare, Insurance, and ￰9￱ is estimated that the smart contracts market, led by Ethereum, will grow at ~24% CAGR through 2032, with other sources offering close estimates: Figure 4: Smart Contracts Market (Fortune Business Insights) Ethereum ￰10￱ There is another reason why I, personally, like Ethereum more than Bitcoin, derived from its Proof-of-Stake transaction processing method, compared to Proof-of-Work for Bitcoin: Figure 5: Proof-of-Stake Vs Proof-of-Work (Investopedia) It seems that Bitcoin mining consumes a similar amount of power to the ￰11￱ much could that increase?

Not clear, while Proof-of-Stake makes Ethereum vastly more energy efficient than Bitcoin, ~99.9% reduction in energy consumption per transaction: Figure 6: Crypto Energy Usage (CoinLaw) Finally, let’s talk about what is perceived as a disadvantage compared to Bitcoin, that there is no upper limit to the amount of ETH that can exist. However, there are two factors that drastically limited the number of ETH created: the transition to Proof-of-Stake, and the introduction of an upgrade called EIP-1559, according to which a part of the ETH transaction fee paid for each transaction is removed from circulation ￰12￱ a result, the Ether supply was relatively constant in the last two years: Figure 7: Ether Supply Evolution ( CoinCodex ) What is FETH Fidelity Ethereum Fund is an ETF that seeks to track the performance of ether denominated in ￰13￱ comes with a low 0.25% expense ratio , the same as for iShares Ethereum Trust ETF ( ETHA ), which is the largest Ethereum ETF.

Therefore, their performance is nearly identical, and it’s the same for two smaller Ethereum ETFs with expense ratios of 0.15%-0.20%: Figure 8: FETH Performance Against Peers (Seeking Alpha) With this identical performance, ETHA has about $17.6B AUM (assets under management), while FETH has only about $3.55B. However, I think that FETH might have an advantage because its underlying ether is custodied by a subsidiary of Fidelity, compared to ETHA, which uses third parties, so their low fee is more uncertain over ￰14￱ $3.55B AUM is good enough for me, ￰15￱ my previous sections, I presented my mid-to-long term bullish thesis, and a very small initial position in FETH would be interesting.

However, I already have an existing position (more about that later), and I am trying to add more, but through other strategies, because it seems that Ethereum is in a short-term consolidation pattern, with a horizontal channel around the current price: Figure 9: FETH Technical Analysis (Seeking Alpha) FETH has a high IV (Implied Volatility), like any other Ethereum ETF, due to the high uncertainty of its ￰16￱ IV is high, that means that we can collect fat premiums by selling options. Let’s compare IV for different strike prices and expiration dates: Figure 10: FETH IV Smile Graph (Market Chameleon) We can see the highest IV for the March '26 expiration, and this is not too close but also not too distant, so I think this is a good expiration date.

A Simple Yet Versatile Strategy for a High IV A good strategy when IV is high for a mid-to-long term bullish strategy, but short-term neutral, is a simple covered Call (we sell a Call option over 100 shares). Considering the March expiration, I want to look at an OTM (Out-of-The-Money) strike price to give it some room to ￰17￱ example: Figure 11: FETH Covered Call ( OptionCharts ) We can observe that: On the upside, maximum ROI is 46% in a bit more than five months with FETH above $58. This will be outperformed by simply owning FETH above ~$66, but I said that I am more cautious for the short ￰18￱ if FETH breaks the current channel, I expect it to go up more to $55-$60 if we look at the previous jump from ~$37 to ~$45 (see Figure #9).

On the downside, break-even is lowered by about 14%, due to the collected ￰19￱ always, we can buy back our Call option when it has low extrinsic value, and we can roll it forward to a further expiration for an even higher annual ￰20￱ is simple to do with FETH at about the same ￰21￱ sell another 5-6 months 65 Call for another ~$535, and we push our annualized ROI to about 100%. However, if FETH jumps higher than expected, we can still do that, but by paying attention to always have an overall ￰22￱ example: Step 1 (February-March '26): FETH jumps to $75 close to expiration; we need to buy back our 58 Call for ~$1710 for an overall loss of $1175 (535-1710).

Step 1’ (February-March ’26): Suppose we sell another far OTM Call option for another ~$535; we have an overall debit of $640 (535-1175). Step 2 (Summer ’26): If FETH will be at ~$75, we lost $640 from these options, but at least we gained more from FETH price ￰23￱ 2’ (Summer ’26): But if FETH plunges to $45 again, it’s even worse; we have a significant $640 loss ￰24￱ if we pay attention to always have an overall credit: Step 1 (February-March ’26): FETH jumps to $75 close to expiration; we buy back our 58 Call for ~$1510 for an overall loss of $1175 (535-1710). Step 1’ (February-March ’26): Now we sell an ITM Call option for another ~5-6 months for at least a $1175 premium.

A 68 Call should give us ~$1400, overall credit $225 (1400-1175). Step 2 (Summer ’26): If FETH will be at ~$75, we collected an extra $225 from options, on top of FETH ￰25￱ 2' (Summer ’26): If FETH plunges to $45 again, we have a $225 gain ￰26￱ notice that this gain with FETH at $45 by summer 2026 is lower than the initial $535. Therefore, with FETH at $75 by February-March, we could simply choose to wait: we could be assigned at $58 for only the initial 46%, less than FETH appreciation, but if FETH moves back, we have a higher collected premium of $535. Position and Risk Management This covered Call strategy mitigates some of the short-term risk, and cryptocurrencies can be very chaotic in the short ￰27￱ my loss is higher than the 14% covered by the Call option, I plan to stay long, with an even further OTM Call option, to give the position even more room to grow, since I am mid-to-long term bullish.

Then, even if I am mid-to-long term bullish, that does not come without ￰28￱ example, like any other cryptocurrency, Ethereum faces mid-to-long term political and regulatory ￰29￱ maybe the most important fundamental risk that I can identify for now is ￰30￱ were already numerous types of security attacks , both on smart contracts and on Ethereum ￰31￱ if we look forward towards the quantum era, there could be even higher risks. That’s why I started small, and I trim my position when it grows above ~4% of my portfolio, which is about a normal-sized ￰32￱ good liquidity for these ETF options, I also plan to diversify my position: I started a small Ethereum position (~1% of my portfolio) about five years ago, but I trimmed it over time; it grew too much due to price appreciation, and I plan to trim it again to ~1% now to make room for other strategies.

I keep it because it has unlimited upside. I’m planning to open next week a position through options like the one presented in this article for another ~1%; however, there are even more interesting Ethereum ETFs, like the leveraged ones, and even more interesting strategies, which I plan to address in another ￰33￱ The main reasons for a mid-to-long-term bullish view on Ethereum are its large market cap, with already approved ETFs, and its smart contracts platform, while Bitcoin is mostly a store of ￰34￱ to Bitcoin, there is another advantage: a vast reduction in energy consumption. And, although technically the number of ethers is not limited, the transition to Proof-of-Stake and the EIP-1559 upgrade led to a stable ETH supply in the last two to three years.

A covered Call strategy on FETH capitalizes on high implied volatility, with high collected premiums, while offering downside ￰35￱ most cases, the strategy can be adjusted by rolling forward the Call option for different strike prices by always maintaining a positive overall ￰36￱ bullish long-term prospects, prudent position sizing and risk management are essential due to regulatory and security risks in the crypto space. I plan to keep part of the position with unlimited upside and another part through options for downside protection and high income around the current ETH price.

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