The US Securities and Exchange Commission (SEC) recently granted permission for listing and trading of options on the BlackRock Bitcoin ETF, iShares Bitcoin Trust (IBIT).
BREAKING: 🇺🇸 SEC approves BlackRock’s place options #Bitcoin An ETF. pic.twitter.com/g7R8rSLRI1
– Bitcoin Magazine (@BitcoinMagazine) September 20, 2024
Options authorized on the iShares Bitcoin Trust will be physically settled, meaning that when the option is exercised, Bitcoin will be delivered to fulfill the contract. These American-style options can be exercised at any time before the expiration date, providing flexibility to traders. According to the SEC, the listing will follow the same rules as options in other exchange-traded funds (ETFs), including position limits and margin requirements.
“I think some will be approved soon,” said Bloomberg Senior ETF Analyst Eric Balchunas. “A big win for the bitcoin ETF (as it will attract more money that will attract the big fish). This is a good time to be surprised but not shocked as James Seyffart and I have given a 70% chance of approval by the end of May. .”
The SEC emphasized that this approval will allow investors to close their positions in Bitcoin, using the options market to reduce the inherent volatility of BTC. The iShares Bitcoin Trust has become a highly liquid Bitcoin ETF, helping to meet the needs of options trading. The SEC reiterated that extensive oversight mechanisms will be in place to monitor potential market manipulation and ensure orderly trading.
“IBIT is the most liquid Bitcoin ETF and the 11th most liquid ETF in the US by average volume (34,825,921 shares) and the 18th largest by notional amount ($1,246,060,738),” the SEC said. “As of May 22, 2023, IBIT had approximately 193,956 shareholders.”
This approval by the SEC continues the trend of expanding regulated financial products based on Bitcoin, bringing it closer to full integration within the global financial system. The ability to trade options on the spot Bitcoin ETF provides new opportunities for institutional investors who wish to engage in the Bitcoin market while maintaining a high level of risk management.
“Important note: This is just one stage of approval, the OCC and CFTC must approve before they can officially list,” Balchunas continued. “The other two don’t have a ‘clock’ so I’m not sure when they will be approved. It’s a big step though the SEC came.”