BlackRock, the world’s largest asset manager, has officially launched options trading for its Bitcoin ETF, the iShares Bitcoin Trust (IBIT). This debut comes after the ETF received regulatory approval in January and has since attracted significant inflows.

Increased Liquidity And Reduced Volatility On The Horizon

According to Bloomberg, the introduction of options trading on the $43 billion iShares Bitcoin Trust is anticipated to reduce volatility while broadening Bitcoin’s investor base. 

Alex Thorn, head of firmwide research at Galaxy Digital, stated during a Bloomberg Television interview that as Bitcoin becomes more widely held, its volatility is likely to decrease. “Options will help dampen volatility, and as volatility comes down, people can take larger position sizes,” he explained.

Thorn noted that a decrease in volatility could shift investor sentiment, encouraging them to view Bitcoin as a viable asset for fundamental use cases rather than merely a speculative gamble. 

The availability of options will also enable institutions to hedge their positions more effectively, increasing liquidity and potentially impacting retail trading during bullish market conditions.

Call Options Dominate BlackRock’s Bitcoin ETF On Day 1

Bloomberg ETF analysts Eric Balchunas and James Seyffart reported that on the first day of options trading, the total notional exposure for IBIT reached nearly $1.9 billion, spread across 354,000 contracts. 

Of these contracts, 289,000 were calls, while 65,000 were puts, resulting in a bullish call to put ratio of 4.4:1. Seyffart claimed that this overwhelming interest in call options contributed to Bitcoin hitting new all-time highs of $94,000 during Tuesday’s trading session for the market’s leading crypto.

Balchunas, on the other hand, pointed out that the majority of options contracts are bullish, especially the December 20 call option, which essentially bets that the Bitcoin price will double within a month. This means that based on current prices, investors are expecting BTC to hit a new record high of little over $180,000 by that date. 

The put/call volume ratio for BlackRock’s Bitcoin ETF was “impressive,” according to Balchunas, who noted that the ratio of 0.17 indicates strong bullish sentiment compared to other ETFs, such as the SPDR S&P 500 ETF (SPY) with a ratio of 1.1.

Market expert Marty Party highlighted in a social media post that options on the iShares Bitcoin Trust will settle in actual Bitcoin. This means that when an option contract is exercised, settlement will involve the delivery of Bitcoin, giving investors direct exposure to BTC price movements without the need to interact with crypto exchanges. 

At the time of writing, the market’s leading digital asset is trading at $91,580, up 4% in the weekly time frame after today’s bullish move to its new high. 

Featured image from DALL-E, chart from TradingView.com