Trading options for the first-ever Bitcoin exchange-traded fund (ETF) officially launched on November 19, propelling Bitcoin to reach new all-time highs.
Notably, BlackRock’s iShares Bitcoin Trust (IBIT), the pioneering Bitcoin ETF authorized for options trading, played a crucial role in this significant event.
Seyffart’s View on Bitcoin ETF Options
The launch triggered substantial market activity, with nearly $1.9 billion in notional exposure traded, as elucidated by Bloomberg Intelligence ETF analyst James Seyffart.
Commenting on the event, Seyffart remarked,
“The total volume of $IBIT’s initial options trading day was just under $1.9 billion in notional exposure through 354,000 contracts. Of these, 289,000 were Calls and 65,000 were Puts.”
He further stated,
“This represents a ratio of 4.4:1. These options likely played a substantial role in driving Bitcoin to its new all-time highs today.”
How Will Options Trading Impact Bitcoin ETF?
For the uninitiated, in options trading, a call option gives the purchaser the right, though not the obligation, to buy an asset at a pre-set price within a defined period.
If exercised, the call seller must sell the asset at the agreed-upon price.
On the flip side, a put option enables the holder to sell the asset at a specific price on or before its expiry, offering a strategic approach to hedge against or profit from market price fluctuations.
In comparison to the ProShares Bitcoin Strategy ETF (BITO), the first U.S.-based ETF providing exposure to Bitcoin, the recent surge in Bitcoin options trading activity is notably noticeable.
For instance, BITO saw a trading volume of $363 million on its debut, despite significant expectations surrounding its launch.
Balchunas Echoes Similar Sentiments
Eric Balchunas, Bloomberg’s senior ETF analyst, pointed to this contrast to emphasize the strong momentum behind the burgeoning options market, indicative of increasing investor interest in Bitcoin-linked financial instruments, stating,
“$1.9 billion on day one is unprecedented.”
Balchunas underlined the impressive growth of the newly introduced Bitcoin-related ETF, which has already reached a $1.9 billion trading volume threshold while operating under a 25,000 contract cap.
This performance surpasses BITO’s four-year journey to hit the $363 million mark.
Nevertheless, in comparison to established ETFs like $GLD, which achieved $5 billion in a single day, the new ETF still has headroom for expansion.
These statistics highlight its significant potential to draw increased investor attention as it gains traction in the market.
What Lies Ahead?
The remarkable success of IBIT’s options trading premiere led to a noteworthy $4.28 billion in traded value on November 19, a milestone typically associated with combined flows from multiple high-performing funds rather than a single entity.
This accomplishment underscores the escalating demand for Bitcoin-related financial tools.
Meanwhile, Grayscale is gearing up to heighten competition by unveiling options for its spot Bitcoin ETFs on November 20.
It will be intriguing to observe how this signals a swiftly evolving landscape for institutional-grade cryptocurrency investment products in the United States.