Options trading for BlackRock’s exchange-traded fund (ETF), iShares Bitcoin Trust ETF (IBIT), began on November 19 on Nasdaq and has already moved more than $446 million in its first few hours of trading.
Bloomberg senior ETF analyst Eric Balchunas noted that the volume is “a ton” for the first day, with almost 98% of trading contracts being call contracts. He added:
“Seems very bullish, especially the December 20 C100, which is basically the price of Bitcoin [Bitcoin] will double in the next month.”
A “call” in an options contract gives the right to purchase a security at a predetermined price, known as the strike price, within a specific period of time, called the expiration date.
IBIT’s spot trading volume at the time of writing was $1.6 billion, based on Barchart facts.
There’s more to come
The addition of options trading to IBIT came soon after the Office of the Comptroller of the currency’s (OCC) Nov. 18 memo saying it was “preparing for clearance, settlement and risk management.”
The approval gives the green light to options trading for IBIT and other spot Bitcoin ETFs pointed out by Bloomberg ETF analyst James Seyffart, who expects more listings of these products this week.
Bitwise CEO Hunter Horsley expected Options trading on the company’s BITB begins on November 20.
‘Unusual market dynamics’
Balchunas previously said the options list for spot Bitcoin ETFs is a positive development as it gives traditional investors more tools and attracts more liquidity from “big fish.”
However, Jeffrey Park, head of alpha strategies at Bitwise, says declared that Bitcoin still gets special treatment for trading. He pointed out that IBIT only has 25,000 contracts as an approved position limit, which represents just 0.5% of the ETF’s shares.
An option contract limit limits the number of contracts that can be held on the same side of the market. The limit varies per ETF based on the number of shares outstanding and trading volume.
According to Park, IBIT should have been eligible for 400,000 option contracts, which would have reached only 7% of the outstanding shares. He also compares IBIT’s limit to the 2,000 contract limit of CME Bitcoin futures contracts, which equates to 175,000 contracts for IBIT.
Park added:
“While I’m thrilled that we’ve crossed the finish line – especially in 2024 – it’s hard to ignore the continued special treatment that Bitcoin continues to receive. I long for the day when Bitcoin is no longer marked with an asterisk.”
He explained that the 25,000 contract limit could create “unusual market dynamics” and advised retail traders to explore arbitrage opportunities that could arise as a result of Bitcoin ETF options.