Nasdaq has announced plans to list and trade options on BlackRock’s iShares Bitcoin Trust (IBIT), following approval from the U.S. Commodity Futures Trading Commission (CFTC).
The approval comes at a time when BlackRock’s IBIT has already gained significant traction, becoming one of the most liquid bitcoin-related products in the U.S. Notably, BlackRock’s BTC exchange-traded funds (ETFs) boasts over $3 billion in total value traded and over $43 billion in net assets as of November 18, 2024.
Nasdaq’s options trading on BlackRock bitcoin ETF
For context, options are financial derivatives that give traders the right, but not the obligation, to buy or sell a cryptoasset at a predetermined price (called the strike price) on or before a specific date. Options are of two main types — “Call options”, which allow the holder to buy the cryptocurrency and “Put options”, which allow the holder to sell the cryptocurrency.
According to the report, Nasdaq’s options trading on BlackRock’s IBIT is designed to expand the tools available to traders and institutional investors, representing a significant milestone for bitcoin’s integration into traditional financial markets.
“Our intent at Nasdaq is to list and trade these options as early as tomorrow. Getting these options listed on IBIT into the market I think will be very exciting for investors because that’s really what we have heard from them,” Alison Hennessy, head of ETP listings at Nasdaq said.
Expected to launch on Tuesday, November 19, 2024, the options on BlackRock’s Bitcoin ETF will be physically settled and follow American-style exercise rules, allowing contract holders to exercise their options at any time before expiration.
Nasdaq has implemented position limits of 25,000 contracts to mitigate risks and ensure market stability. These measures are part of amendments aimed at addressing concerns about volatility and market manipulation.
Implications for investors
This development is expected to attract more institutional investors by offering sophisticated ways to hedge against BTC price fluctuations or gain leveraged exposure to the asset.
Industry experts like MicroStrategy‘s Michael Saylor have noted that introducing derivatives linked to BTC ETFs could accelerate institutional adoption. Furthermore, several analysts believe this could bring additional liquidity and credibility to BTC markets.
Meanwhile, Nasdaq is reportedly exploring similar options for Ethereum-based ETFs. These advancements highlight the growing trend of traditional financial institutions incorporating digital assets into their offerings.
While introducing options presents new opportunities, it raises concerns about bitcoin’s volatility and the risks associated with leveraged trading. The CFTC’s approval required Nasdaq to adopt rigorous surveillance mechanisms to address these challenges and protect investors.
Overall, this move underscores the increasing acceptance of cryptocurrencies within traditional finance and could catalyze broader market adoption. However, regulatory oversight and market stability remain critical as the crypto ecosystem develops.
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