Bitcoin ETF options set to go live following SEC approval of BlackRock's application

According to a filing on Friday, the US Securities & Exchange Commission (SEC) approved BlackRock's 19-b4 application to list and trade options on the iShares Bitcoin Trust (IBIT).

BlackRock receives approval to trade options for spot Bitcoin ETFs

The SEC approved BlackRock's application to list and trade option contracts on its iShares Bitcoin Trust (IBIT). The approval was revealed in a filing released on Friday, allowing for physically settled options. This means that when a contract is exercised, it will result in the delivery of Bitcoin.

Options trading is a form of derivatives trading that offers investors the right, but not the obligation, to buy or sell an asset at a predetermined price and within a specific time frame.

BlackRock will treat IBIT options as American-styled options, allowing investors to exercise the contract any time before or on the expiration date. This style allows investors to easily react to market changes to maximize profits and avoid losses.

The SEC stated that the options on IBIT will provide investors with accurate risk management and "hedging" to gain exposure to Bitcoin's price and to Bitcoin-related products.

Options on IBIT will follow BlackRock's listing standards and remain guided by SEC rules.

"The Exchange's initial listing standards require, among other things, that the security underlying a listed option be 'characterized by a substantial number of outstanding shares that are widely held and actively traded," the filing stated.

BlackRock also proposed listing options contracts for its Ethereum Trust in August to expand its investment tools for Ethereum and make crypto investments more accessible to financial markets.

The SEC approved 11 spot Bitcoin ETFs in January but delayed approving options on the product until now.

Following the approval of BlackRock's request, crypto ETF experts anticipate the SEC will eventually extend the approval to other issuers.

"I'm assuming others will be approved in short order. Huge win for the bitcoin ETFs (as it will attract more liquidity which will in turn attract more big fish)," said Bloomberg analyst Eric Balchunas.

Balchunas also noted that the Office of the Comptroller of the Currency (OCC) and the Commodity & Futures Trading Commission (CFTC) must also give their approval before the options contract for IBIT can go live.