The U.S. Securities and Exchange Commission (SEC) has approved Nasdaq Inc.'s application to list options on BlackRock's iShares Bitcoin Trust ETF. This brings trading in traditional Bitcoin ETF derivatives one step closer to the starting line.
Options are financial derivatives that give investors the right, but not the obligation, to buy (call option) or sell (put option) an underlying asset at a predetermined price before or on a specific expiration date. In traditional finance, options are frequently used for risk hedging, speculation, or leveraging investment positions. Soon, these options on the spot Bitcoin ETF "IBIT" will be available for trading, according to a statement from the SEC.
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Another Milestone for the Industry
Shortly after successful debut of spot Bitcoin ETFs this January, exchanges submitted their first applications for options to the SEC. The SEC oversees the technical rule changes that exchanges must make to list options. Just like the underlying products, the approval process took some time. The SEC required several adjustments, but now the first fund has been approved. More exchanges are likely to follow soon, offering options on other spot Bitcoin ETFs.
The approval for the listing and trading of options on a Bitcoin ETF marks another positive step for the industry. Options are one of the most popular derivative forms among traditional investors, but they have so far been accessible only through a few exchanges.
Competition for crypto exchanges
Until now, investors had to rely on crypto-native exchanges to trade Bitcoin options. Although the Chicago Mercantile Exchange (CME) has offered similar derivatives for several years, the majority of trading volume is handled by crypto platform Deribit, which accounts for over 90% of volume. CME's Bitcoin options account for only about 10% of the volume seen on crypto exchanges.
Bitcoin ETF options are expected to offer an affordable and widely accessible alternative after their launch. These derivatives still need approval from the Options Clearing Corporation and the Commodity Futures Trading Commission before trading can begin. How long this process will take remains unclear, but the SEC's green light is likely the biggest hurdle that has now been overcome.
