Options on BlackRock’s popular iShares Bitcoin Trust ETF (IBIT) began trading on the Nasdaq Tuesday, ushering in a new way to trade and speculate on the price of bitcoin.
IBIT traded 73,000 options contracts in the first 60 mins of trading Tuesday, Nasdaq told CNBC, placing the fund in the top 20 of the most active nonindex options.
Options trading allows investors to play bitcoin’s notorious volatility by letting them buy or sell an asset at a predetermined price based on whether they anticipate the price will rise or fall in a given period.
“Bitcoin has a lively derivatives market, but in the U.S. it is still tiny compared to other asset classes, and is largely limited to institutional players,” said Noelle Acheson, economist and author of the “Crypto is Macro Now” newsletter. “A deeper onshore derivatives market will enhance the growing market sophistication. This will reinforce investor confidence in the asset, bringing in new cohorts while enabling a greater variety of investment and trading strategies … [That] should, all else being equal, dampen both volatility and downside.”
The market for options contracts on major ETFs can be extremely active, and are widely used by more sophisticated traders. For example, over the past five business days, Interactive Brokers clients have more options orders on the Invesco QQQ Trust (QQQ) and the SDPR S&P 500 ETF Trust (SPY) than for the funds themselves, according to data from the brokerage.
The launch of the bitcoin ETF options will likely also lead to new funds that incorporate those options, said Todd Sohn, ETF strategist at Strategas.
“Grayscale already did a filing for a covered call [fund], and I’m sure BlackRock will come out with it too. And then we’re going to get buffers, and then we’re going to get whatever other trend-following-type strategy that folks think of. I think the ecosystem’s really going to start to fly here,” Sohn said.
Spot bitcoin ETFs began trading in January and have been hailed as the most successful ETF launches in history.
Other bitcoin ETFs are expected to have options available as soon as this week. Last month, the Securities and Exchange Commission approved the rule changes filed by the New York Stock Exchange, which lists the Grayscale Bitcoin Trust (GBTC), the Grayscale Bitcoin Mini Trust (BTC) and the Bitwise Bitcoin ETF (BITB), and Cboe Global Markets, which lists the Fidelity Wise Origin Bitcoin Fund (FBTC) and the ARK 21Shares Bitcoin ETF (ARKB).