After a lengthy approval process, options on BlackRock's Bitcoin ETF (IBIT) have begun trading on Nasdaq. These products offer investors new ways to speculate on the price of bitcoin. On the first day of trading, options on the Bitcoin ETF reached $1.9 billion in volume.
Options are financial derivatives that give investors the right, but not the obligation, to buy or sell an underlying asset at a fixed price before a specified date. They are often used to hedge risk, speculate on price movements, or enhance portfolio strategies. Options are especially popular among traditional investors. For example, CNBC reported that over the past five trading days, Interactive Brokers customers have placed more options orders on the Invesco QQQ Trust (QQQ) and the SPDR S&P 500 ETF Trust (SPY) than on the funds themselves.
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$1.9 Billion in first-day volume
On the first day, nearly $2 billion in options were traded on BlackRock's bitcoin exchange traded fund (ETF), the iShares Bitcoin Trust ETF (IBIT). The put/call ratio on IBIT's debut day was 0.225, with over 82% of traders betting on a higher bitcoin price. These options likely helped push bitcoin to a new all-time high.
UPDATE: Final tally of $IBIT's 1st day of options is just shy of $1.9 billion in notional exposure traded via 354k contracts. 289k were Calls & 65k were Puts. That's a ratio of 4.4:1. These options were almost certainly part of the move to the new #Bitcoin all time highs today pic.twitter.com/IN3s9hajJ2
— James Seyffart (@JSeyff) November 19, 2024
The highest activity was seen in January call options with a strike price of $55, followed by December calls with a strike price of $65 - 25% higher than the ETF's closing trading price on Monday.
Nearly $30 billion in net inflows
Billions more have flowed into U.S. bitcoin ETFs over the past few months. When traders buy options on these funds, market makers are required to buy the underlying ETF. As a result, derivatives also affect the net flows of bitcoin ETFs. Since their launch in January 2024, $29.4 billion has flowed into the funds.
Daily flows of US Bitcoin ETFs (USDm) / Source: CVJ.CH Bitcoin ETF Overview
Thanks to the existing capital in the Grayscale Bitcoin ETF (GBTC) and the significant rise in the price of bitcoin, these ETFs now manage over $102 billion. By comparison, gold ETFs in the U.S. collectively manage approximately $121 billion.
