Trading in options on spot BTC ETFs opened in the United States

What’s new? On November 19, trading in options on spot bitcoin exchange-traded funds (ETFs) started in the United States. The first to receive approval from the Securities and Exchange Commission (SEC) were options on IBIT fund shares from the largest investment company BlackRock with assets under management of $11,5 trillion. Bloomberg analyst James Seyffart noted that at the end of the first day, the new product showed very modest results, which nevertheless pushed bitcoin to a new high.

Source: X.com

What else is known? According to Seyffart, trading volume totaled $1,9 billion across 354 000 contracts, including 289 000 put options and 65 000 call options.

“That’s a ratio of 4.4:1. These options were almost certainly part of the move to the new bitcoin all-time highs today,” the expert added.

A call option gives the buyer the right, but not the obligation, to buy an asset at a specified price within a certain period. If the buyer realizes the “call”, the seller must sell the asset. Conversely, a put option allows the buyer to sell the asset at a specified price on or before the expiration date.

His colleague Eric Balchunas also noted that the result for the first day is mixed. For example, the trading volume is well above the average of ProShares’ BITO bitcoin futures fund launched in 2021 ($363 million), but well below State Street Global Advisors’ GLD gold trust ($5 billion).

“That said, $1,9b isn’t quite big dog level yet tho, eg $GLD did $5b today, but give it a few more days/weeks,” the analyst concluded.

Source: X.com

As for bitcoin, its exchange rate hit the $93 900 mark for the first time in history on Tuesday. The asset has repeatedly set highs this month amid Donald Trump’s victory in the presidential election and traders’ growing optimism due to the expectation of a more favorable regulatory environment.

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At the time of writing, the exchange rate has corrected to $92 951, a weekly gain of 6,3%, and the asset is up 120% since the beginning of the year.

Spot bitcoin exchange-traded funds began trading on the Nasdaq, NYSE, and CBOE stock exchanges on January 11, after receiving SEC approval. There are currently 12 such products from leading investment firms, and collectively they have accumulated $98,37 billion worth of bitcoins under management, which is 5,38% of the asset’s market capitalization.

So far, only BlackRock has launched trading in BTC ETF options, and its IBIT fund is the largest in the segment, with $29,58 billion in inflows and $44,02 billion in assets under management. However, similar products from Bitwise and Grayscale will be launched on November 20, and other companies are expected to follow suit.

According to The Block, the cumulative trading volume of spot BTC ETF shares has exceeded $524 billion since their launch. As Anchorage Digital co-founder and CEO Nathan McCauley noted, the launch of options on these products will strengthen bitcoin’s position as an asset for institutional investment, along with stocks, bonds, and commodities.

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Options provide liquidity and price discovery for large organizations by giving them the ability to watch the price of the underlying asset (in this case bitcoin) change. Large organizations typically use options for hedging in trading, while retail traders use them for speculation.

Back in September, Bitwise senior executive Jeffrey Park noted that bitcoin ETF options would provide the market with regulated leverage on a perpetual commodity whose supply is truly limited.

Analyst Dennis Dick noted in an interview with The Block that the advent of options on BTC ETFs could reduce volatility by increasing open interest (OI) and the emergence of real buyers/sellers, strengthening the market and increasing liquidity.

In mid-November, bitcoin’s correlation with gold fell to its lowest level since late last year. Analysts noted the growing popularity of the first cryptocurrency as an alternative to the precious metal as a hedge.