SEC Greenlights Options Trading for BlackRock’s IBIT Spot Bitcoin ETF

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

The options will be physically settled, meaning Bitcoin will be delivered when the option is exercised.

As American-style options, they can be exercised any time before expiration, providing flexibility to traders.

The SEC noted that these options will follow the same regulations as other exchange-traded fund (ETF) options, including position limits and margin requirements.

Eric Balchunas, Senior ETF Analyst at Bloomberg, stated that other approvals may follow, adding that the increase in liquidity could attract larger investors.

I'm assuming others will be approved in short order. Huge win for the the bitcoin ETFs (as it will attract more liquidity which will in turn attract more big fish). This is nice surprise re timing but not a shocker as @JSeyff and I gave 70% odds of approval by end of May. pic.twitter.com/a8mUGLOcKG
— Eric Balchunas (@EricBalchunas) September 20, 2024

Balchunas also noted that his team had anticipated a 70% likelihood of approval by the end of May.

The SEC indicated that this approval allows investors to hedge their Bitcoin positions and manage volatility through the options market.

The iShares Bitcoin Trust, one of the most liquid spot Bitcoin ETFs, met the necessary criteria for supporting options trading.

The SEC also emphasized that strong surveillance measures will be in place to monitor trading activity and prevent manipulation.

According to the SEC, IBIT ranks 11th among U.S. ETFs by average daily volume (34,825,921 shares) and 18th by average notional value ($1,246,060,738). As of May 22nd, 2023, IBIT had approximately 193,956 shareholders.

Balchunas also mentioned that while SEC approval is a key step, final approval from the OCC and CFTC is still required before the options can be officially listed. No timeline has been provided for these additional approvals.