The US Securities and Exchange Commission (SEC) has just granted consent To list and trade options on BlackRock’s Bitcoin exchange-traded fund, iShares Bitcoin Trust (IBIT).
BREAKING: SEC Approves BlackRock’s Spot Stock Options #Bitcoin Exchange traded fund. pic.twitter.com/g7R8rSLRI1
— Bitcoin Magazine (@BitcoinMagazine) September 20, 2024
Options 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 for traders. 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 the others will be approved soon.” He said “A big win for Bitcoin ETFs (because they will attract more liquidity which will attract more big fish),” said Eric Balchunas, Bloomberg’s chief ETF analyst. “It’s a nice surprise in terms of timing but not a shocker as James Seyvart and I had expected approval to reach 70% by the end of May.”
The SEC confirmed that the approval would allow investors to hedge their Bitcoin positions, using the options market to mitigate Bitcoin’s inherent volatility. The iShares Bitcoin Trust was the most liquid Bitcoin ETF, which helped meet the options trading requirements. The SEC also confirmed that extensive oversight mechanisms would be in place to monitor potential market manipulation and ensure orderly trading.
“The SEC has stated that the IBIT Fund is the most liquid and eleventh most liquid Bitcoin ETF in the United States by average size (34,825,921 shares) and eighteenth by average par value ($1,246,060,738). As of May 22, 2023, the IBIT Fund had approximately 193,956 shareholders.”
The SEC’s approval of this continues the trend of expanding the scope of regulated financial products based on Bitcoin, bringing it closer to full integration into the global financial system. The ability to trade options on a spot Bitcoin ETF provides new opportunities for institutional investors who want to engage with the Bitcoin market while maintaining a higher level of risk management.
“Important note: This is just one stage of approval, and the OCC and CFTC must also approve before they are officially listed,” Balchunas continued. “The other two companies don’t have a ‘clock’ so I’m not sure when they will be approved. However, the SEC approval was a big step.”