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

The U.S. Securities and Exchange Commission (SEC) has approved listing and trading of options on BlackRock’s spot Bitcoin ETF, the iShares Bitcoin Trust (IBIT).

BREAKING: 🇺🇸 SEC Approves BlackRock Stock Options #bitcoin Exchange Traded Fund (ETF). pic.twitter.com/g7R8rSLRI1

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Approved options on the iShares Bitcoin Trust are physically settled, meaning that when the option is exercised, Bitcoin is delivered to fulfill the contract. These American-style options can be exercised at any time before the expiration date, giving traders flexibility. According to the SEC, the listing follows the same rules as options on other exchange-traded funds (ETFs), including position limits and margin requirements.

“I would expect another ETF to be approved soon,” said Eric Balchunas, Bloomberg’s chief ETF analyst. “It’s a huge win for the bitcoin ETF (it will attract more liquidity and more big fish). It’s a nice surprise in terms of timing, but not a shocker, since James Seifert and I had a 70% chance of approval by the end of May.”

The SEC emphasized that this approval would allow investors to hedge their positions on Bitcoin by mitigating the intrinsic volatility of Bitcoin through the options market. The iShares Bitcoin Trust was the most liquid spot Bitcoin ETF, which helped meet the options trading requirements. The SEC also emphasized that extensive oversight mechanisms would be in place to monitor potential market manipulation and ensure orderly trading.

The SEC stated that “IBIT is the most liquid spot Bitcoin ETF and is the 11th most liquid ETF in the United States by average trading volume (34,825,921 shares) and the 18th largest by average notional volume (1,246,060,738 shares).” “As of May 22, 2023, IBIT had approximately 193,956 shareholders.”

This SEC approval continues the trend of expanding regulated financial products based on Bitcoin, bringing it closer to full integration within the global financial system. The ability to trade options on a spot Bitcoin ETF provides new opportunities for institutional investors who want to participate in the Bitcoin market while maintaining a higher level of risk management.

“Important note: This is only one step of approval, and the OCC and CFTC also have to approve before we can officially list,” Balchunas continued. “The other two have no ‘clock’, so it’s unclear when they’ll be approved. However, the SEC’s backing down is a big step forward.”