SEC Approves Options Trading on BlackRock’s IBIT ETF Bitcoin Spot

The US Securities and Exchange Commission (SEC) has just granted approval for the listing and trading of options on BlackRock’s spot Bitcoin ETF, the iShares Bitcoin Trust (IBIT).

BREAKING: 🇺🇸 SEC approves options for BlackRock’s seat #Bitcoin ETFs. pic.twitter.com/g7R8rSLRI1

— Bitcoin Magazine (@BitcoinMagazine) September 20, 2024

Options endorsed 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 for other exchange-traded funds (ETFs), including position limits and margin requirements.

“I expect others to be approved shortly,” said Eric Balchunas, senior ETF analyst at Bloomberg. “Huge win for bitcoin ETFs (as it will attract more liquidity, which will in turn attract more big fish). This is a pleasant surprise, but not a shocker, as James Seyffart and I gave it a 70% chance of approval by the end of May. .”

The SEC pointed out that this approval would allow investors to hedge their Bitcoin positions by using the options market to mitigate BTC’s inherent volatility. The iShares Bitcoin Trust was the most liquid spot Bitcoin ETF, which helped meet the requirements for options trading. The SEC also stressed that there would be extensive oversight mechanisms to monitor potential market manipulation and ensure orderly trading.

“IBIT is the most liquid Bitcoin spot ETF and the 11th most liquid US ETF by average volume (34,825,921 shares) and 18th by average notional size ($1,246,060,738),” the SEC said. “As of May 22, 2023, IBIT had approximately 193,956 shareholders.”

This approval from the SEC continues the trend of expanding regulated financial products based on Bitcoin, pushing it closer to full integration into the global financial system. The ability to trade options on the Bitcoin ETF spot offers 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 only an approval stage, the OCC and CFTC must also approve before officially listing,” Balchunas continued. “The other two don’t have a ‘clock’ so I’m not sure when they will be approved. Big step, though, that the SEC came along.”