The United States Securities and Exchange Commission (SEC) has just granted approval for the listing and trading of options on BlackRock's Bitcoin Spot ETF, the iShares Bitcoin Trust (IBIT).
Options approved on the iShares Bitcoin Trust will be physically settled, meaning that when the option is exercised, bitcoins will be delivered to fulfill the contract. These American-style options can be exercised at any time before the expiration date, giving traders flexibility. According to the SEC, the listing will follow the same rules as options on other exchange-traded funds (ETFs), including position limits and margin requirements.
“I assume others will be approved shortly.” saying Eric Balchunas, senior ETF analyst at Bloomberg: “A big win for bitcoin ETFs (as they will attract more liquidity, which in turn will attract more big fish). It's a nice surprise in terms of timing, but not a surprise, as James Seyffart and I gave it a 70% chance of approval by the end of May.”
The SEC highlighted that this approval would allow investors to hedge their Bitcoin positions, using the options market to mitigate BTC’s inherent volatility. The iShares Bitcoin Trust has been the most liquid spot Bitcoin ETF, which helped it meet the requirements for options trading. The SEC also emphasized that extensive oversight mechanisms would be put in place to monitor potential market manipulation and ensure orderly trading.
“IBIT is the most liquid spot Bitcoin ETF and the 11th most liquid U.S. ETF by average volume (34,825,921 shares) and the 18th largest by average par value ($1,246,060,738),” the SEC stated. “As of May 22, 2023, IBIT had approximately 193,956 shareholders.”
This approval by the SEC continues the trend of expanding regulated Bitcoin-based financial products, bringing them closer to full integration within the global financial system. The ability to trade options on a spot Bitcoin ETF provides new opportunities for institutional investors who wish to participate in the Bitcoin market while maintaining a higher level of risk management.
“Important note: This is just one stage of approval, the OCC and CFTC must also approve it before it is officially listed,” Balchunas continued. “The other two do not have a 'clock', so I am not sure when they will be approved. Nevertheless, it is a great step that the SEC has given its approval.”
