Options trading for BlackRock’s exchange-traded fund (ETF), iShares Bitcoin Trust ETF (IBIT), kicked off on Nov. 19 at Nasdaq, making a splash with over $446 million in trading volume during its first hours. Bloomberg senior ETF analyst, Eric Balchunas, noted that the volume was exceptionally high for the first day, with almost all trading contracts being calls. Balchunas pointed out the bullish sentiment, especially for the Dec 20th C100 call, which essentially bets on Bitcoin’s price doubling within the next month.
In options trading, a call option grants the right to purchase a security at a predetermined price (strike price) within a specific period (expiration date). IBIT’s spot trading volume has already reached $1.6 billion as of press time, as reported by Barchart data.
This milestone for IBIT follows swiftly after the Office of the Comptroller of the Currency (OCC) memo on Nov. 18, signaling its readiness for the clearing, settlement, and risk management of options trading. This approval not only paves the way for IBIT but also for other spot Bitcoin ETFs, as highlighted by Bloomberg ETF analyst James Seyffart, who anticipates additional listings this week. Bitwise CEO, Hunter Horsley, has also indicated that options trading for BITB will commence on Nov. 20.
While the options listing for spot Bitcoin ETFs has been lauded as a positive step by many, Jeffrey Park, head of alpha strategies at Bitwise, expressed concerns about the special treatment Bitcoin receives in trading. Park noted that IBIT’s approved position limit of 25,000 contracts represents a mere 0.5% of the ETF’s shares. He compared this limit to CME Bitcoin futures contracts, which have a 2,000-contract limit, equivalent to 175,000 contracts for IBIT. Park emphasized that IBIT should have qualified for 400,000 options contracts, reaching only 7% of outstanding shares.
Park raised concerns about the 25,000-contract limit potentially leading to “unusual market dynamics” and advised retail traders to explore arbitrage opportunities that may arise from Bitcoin ETF options. Despite the excitement surrounding the launch of options trading for IBIT, Park underscored the need for Bitcoin to be treated on par with other assets, without any special considerations.
As the market continues to evolve, the introduction of options trading for Bitcoin ETFs represents a significant development in the cryptocurrency landscape, offering traditional investors more tools and attracting liquidity from institutional players. The growing interest in IBIT’s options trading signals a shift towards mainstream acceptance of digital assets in the financial markets.