# SEC Approves Bitcoin ETF Options for Nasdaq, NYSE, CBOE
The U.S. Securities and Exchange Commission (SEC) has greenlit Bitcoin ETF options for the Nasdaq, New York Stock Exchange (NYSE), and Chicago Board Options Exchange (CBOE). This landmark decision paves the way for options trading based on five spot Bitcoin ETFs, including the BlackRock iShares Bitcoin Trust ETF (IBIT).
Analysts believe this development could transform Bitcoin into a more flexible investment asset by offering investors opportunities to bet on price volatility, whether upward or downward. Some experts even foresee the potential for a GameStop-like surge, given Bitcoin’s unique characteristics. This article delves into the features of Bitcoin ETF options, the benefits for investors, and the potential impact on Bitcoin prices.
# What Are Bitcoin ETF Options?
Options are financial derivatives granting investors the right, but not the obligation, to buy or sell Bitcoin at a specific price. Call options allow investors to purchase Bitcoin, while put options enable them to sell. For investors anticipating a market correction, put options provide a cost-effective way to bet on a decline, which is more economical than maintaining a short position in the futures market. Julio Moreno of CryptoQuant explained, “Investors can now choose put options to manage risk with less capital than futures.”
# Difference Between ETF Options and Index Options
Bitcoin ETF options differ from conventional index options, which are European-style and settle in cash upon expiration without holding the underlying asset. Index options serve as a method to hedge or invest based on the directional movement of a specific index. In contrast, ETF options, traded like individual stocks, are American-style and can be exercised anytime before expiration. Moreover, the underlying ETF shares can be traded in the spot market. Sungmoon Jung, Head of Research at Korbit, noted, “ETF options are more accessible and flexible than index options, offering opportunities to hold assets and are advantageous during unexpected market shifts.”
# Market Size and Ripple Effects of ETF Options
ETF options are set to increase Bitcoin market liquidity and enhance capital flow efficiency between assets. Sungmoon Jung projected, “The capital flow cycle between ETFs and ETF options propelled SPY to become the largest ETF globally. The market size for BlackRock’s IBIT options could reach $20 billion to $30 billion.” Jeff Park, Head of Alpha Strategy at Bitwise, described the approval as a “significant advancement for the crypto market,” predicting a substantial impact on the industry.
# Benefits for Investors
Bitcoin ETF options offer diverse strategies for investors to engage with Bitcoin price movements. For instance, a covered call strategy—holding Bitcoin spot ETFs while selling call options—can generate stable premium income. If an investor holds Bitcoin spot ETFs (BITO) priced at $50 and sells a call option with a $55 strike price, they can earn a premium. If BITO hovers around $50 or slightly increases, the investor profits from both BITO’s value and the option premium. Should Bitcoin prices surge significantly, the investor might only profit up to the $55 strike price, while any further increase benefits the option buyer. Conversely, if BITO prices drop, the premium can offset some losses. Roundhill Bitcoin Covered Call Strategy ETF exemplifies this, delivering annual returns of 30 percent through such strategies.
# Increased Flexibility for Long-Term Investment
The introduction of Bitcoin ETF options allows for leverage and setting investment durations. Previously, retail investors used perpetual contracts, unsuitable for long-term investment due to recurring funding costs. Now, with the ability to set durations, investors can adopt long-term strategies without daily management. Jeff Park highlighted, “This approval opens opportunities for long-term delta at lower premiums, enhancing Bitcoin’s attractiveness to investors.”
# Enhanced Risk Protection
The launch of Bitcoin ETF options signals a significant shift for the Bitcoin market. The introduction will see the Options Clearing Corporation (OCC) regulating and managing Bitcoin option transactions, reducing counterparty risks. This regulatory environment could mitigate Jump to Default (JTD) risks, where rapid market changes can lead to severe asset value declines. As regulated Bitcoin options trading flourishes, the market could expand significantly, attracting more investors and boosting Bitcoin’s financial value.
# Impact on Bitcoin Prices
While the introduction of Bitcoin ETF options is promising for investors, experts are divided on its direct impact on Bitcoin prices. Some predict an increase due to higher market liquidity, while others express concerns about heightened volatility.
# A GameStop-like Surge for Bitcoin?
Bitcoin bull Minseh Bhindi argues that the introduction of Bitcoin options significantly raises the potential for price surges. “Remember the massive rally from GameStop? Imagine what could happen with a gamma squeeze in IBIT,” he explained. A gamma squeeze occurs when substantial call option buys force sellers to purchase the underlying asset to hedge risk, driving prices up rapidly. Steve Sosnick, Chief Strategist at Interactive Brokers, noted, “The GameStop surge in 2021 demonstrated how option buys can influence the market against institutions, potentially causing explosive volatility.”
# Gradual Market Stabilization Expected
Not all experts foresee drastic volatility. James Butterfield, Head of Research at Coinshares, believes Bitcoin options could gradually reduce market volatility. “Options allow for diverse trading strategies, which can stabilize the market long-term,” he said, emphasizing retail participation and improved liquidity through leverage. However, unlike ETFs, options lack bankruptcy protection, underscoring the need for robust risk management. Julio Moreno of CryptoQuant added, “The initial increase in trading volume might temporarily raise volatility, but as the market adapts to managing risks through options, stability should improve over time.”
