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After gathering dust for months, applications to list options on spot Bitcoin (BTC) exchange-traded funds (ETFs) are finally getting attention from regulators. Expect BTC ETF options to start trading on United States exchanges this year. Options on Ethereum (ETH) ETFs will soon follow.<\/p>\n
Options are contracts that grant the right to buy or sell \u2014 \u201ccall\u201d or \u201cput\u201d in trader parlance \u2014 an underlying asset at a certain price. They are attractive hedging instruments (don\u2019t you wish you locked in the right to sell BTC at $73,000?) and are popular with speculators, too.<\/p>\n
Adding options trading may seem anticlimactic in the wake of BTC ETFs\u2019 long-awaited launch in January. That couldn\u2019t be further from the truth. Options are critical for institutional adoption \u2014 especially with highly volatile crypto ETFs. Plus, if existing crypto options are any indication, spot BTC ETF options will be a huge market.<\/p>\n
In January, the three US equities exchanges that list spot BTC ETFs \u2014 the New York Stock Exchange (NYSE) Arca, Cboe, and Nasdaq \u2014 asked the Securities and Exchange Commission (SEC) if they could also list options on those funds.<\/p>\n The SEC greeted the applications with a deafening silence, and outside input wasn\u2019t encouraging. In May, private industry watchdog Better Markets Inc. urged the SEC to \u201cproceed especially cautiously because\u2026 the inevitable marketing of such options to retail investors could cause tremendous harm,\u201d as evidenced by \u201cthe meme stock frenzy surrounding GameStop in 2021.\u201d<\/p>\n Related: How the Bank of Japan wrecked the yen carry trade \u2014 and crypto markets<\/strong><\/em><\/p>\n The SEC apparently took this to heart and asked for more time to make a decision in March, and, again, in April, and, again, in July. The ice is finally thawing. On Aug. 8, Cboe filed an amended application to the SEC. It\u2019s almost three times longer than the first and addresses issues such as market manipulation and position limits in greater detail.<\/p>\n \u201cThere’s definitely some movement on Bitcoin ETF options,\u201d Bloomberg Intelligence analyst James Seyffart said in a post on X. “The SEC likely gave some sort of feedback.”<\/p>\n Bloomberg predicts spot BTC options go live in the fourth quarter. Given election-year pressures on the SEC, sometime before November is likely. Spot ETH ETFs will follow suit. According to an Aug. 6 filing, Nasdaq asked the SEC for permission to list options on BlackRock\u2019s iShares Ethereum Trust (ETHA).<\/p>\n Meanwhile, US investors have free reign to trade options on a strictly inferior class of Bitcoin ETFs \u2014 those that synthetically track BTC\u2019s price performance using futures.<\/p>\n Futures ETFs generally underperform spot market equivalents because the cost of rolling over monthly futures contracts drags down overall returns. According to crypto researcher K33 Research, the most popular Bitcoin futures ETF \u2014 ProShares\u2019 Bitcoin Strategy ETF (BITO) \u2014 underperformed spot by around 2.6% between January and May.<\/p>\n Related: Forget about Ethereum ETFs \u2014 Here’s what you can do instead<\/em><\/strong><\/p>\n Absent any better alternatives, the market for these options is white hot. In total, open interest on BTC futures ETFs \u2014 measured by the notional value of all active call and put contracts \u2014 exceeds $3.25 billion as of market close on Aug. 9, according to data from The Options Clearing Corporation, an industry self-regulatory organization (SRO).<\/p>\n For comparison, the combined net asset value of all BTC futures ETFs is approximately $4.3 billion, according to data from Yahoo Finance. In other words, the market for options on BTC ETFs is almost as large as the market for BTC ETFs themselves.<\/p>\n Spot BTC ETFs command a vastly larger asset base \u2014 more than $58 billion as of market close on Aug. 9. If the options on BTC futures ETFs are any guide, a nearly $45 billion new BTC market is waiting to be born.<\/p>\n A milestone for mass adoption <\/em><\/strong><\/p>\n That\u2019s more than just a big number. Options are crucial market infrastructure and mark an important waystation on the road to mass crypto adoption.<\/p>\n Financial advisors \u2014 who control as much as half of investment flows in the $9 trillion ETF market \u2014 rely on options to safeguard against sharp market movements (like the 28% drop in Ether\u2019s spot price on Aug. 5). More than 10% of advisers actively used options to manage client portfolios as of 2023, according to a survey byThe Journal of Financial Planning.<\/p>\n Options also play a critical role in hedge fund strategies, such as the \u201ccovered strangle\u201d touted by 10x Research, an investment research firm.<\/p>\n Already, Morgan Stanley \u2014 the largest financial advisory with some $3.75 trillion under management \u2014 has given its 15,000 advisors the greenlight to pitch spot BTC ETFs to clients. Options will only make spot BTC ETFs more attractive to institutional capital.<\/p>\n If you listen closely, you can already hear the investment flows pouring in.<\/p>\n This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author\u2019s alone and do not necessarily reflect or represent the views and opinions of EmilyNews. <\/em><\/p>\n Check other news for today<\/span> and Please stand by..<\/p>\n *********************************<\/p>\n If one of the paying programs on our Monitor appeals to you, please support EmilyNews<\/em> by registering for it on our website. Thanks very very much!<\/p>\n EN web Support Chat<\/strong> | Hyips and Crypto questions \u2013 HyipChatEN<\/a><\/strong><\/p>\n Telegram Chat for Crypto and Hyip reports: @HyipChatEN<\/a><\/strong><\/p>\n *********************************<\/p>\n Be the first to get most important HYIP news everyday! If you like this article and want to support EN \u2013 please share it by using at least few of social media buttons below. Thanks and See you tomorrow!<\/p>\n![](\"https:\/\/s3.cointelegraph.com\/uploads\/2024-08\/e73905c6-c09b-4691-81e4-0d71aa07af71.jpg\")
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