BlackRock’s iShares Bitcoin Trust ETF (IBIT) saw a successful start to options trading on Nov. 19 at Nasdaq, moving over $446 million in its first trading hours.
According to Bloomberg senior ETF analyst Eric Balchunas, the trading volume was impressive for a first day, with almost 98% of contracts being calls. Balchunas noted, “Seems very bullish, esp the Dec20th C100, which is basically betting price of btc [Bitcoin] will double in the next month.”
“A ‘call’ in an option contract gives the right to purchase a security at a predetermined price, known as the strike price, within a specific period, called the expiration date.”
IBIT’s spot trading volume reached $1.6 billion as of press time, based on Barchart data.
More to come
Options trading for IBIT was quickly implemented following the Office of the Comptroller of the Currency’s (OCC) Nov. 18 memo, signaling preparations for clearance, settlement, and risk management.
Bitwise CEO Hunter Horsley expects options trading on BITB to commence on Nov. 20.
‘Unusual market dynamics’
While options listing for spot Bitcoin ETFs is considered a positive development by many, there are concerns about the special treatment Bitcoin receives in trading. Jeffrey Park, head of alpha strategies at Bitwise, pointed out that IBIT has a limit of 25,000 contracts, representing only 0.5% of the ETF’s shares.
According to Park, IBIT should have qualified for 400,000 options contracts, which would only account for 7% of outstanding shares. He also highlighted the contrast with CME Bitcoin futures contracts, which have a 2,000-contract limit, equivalent to 175,000 contracts for IBIT.
Park emphasized the need for Bitcoin to be treated like any other asset in the market, without special considerations. He suggested that the 25,000-contract limit could lead to “unusual market dynamics” and encouraged retail traders to explore arbitrage opportunities that may arise from Bitcoin ETF options.
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