The Securities and Exchange Commission (SEC) of the United States is currently inviting comments on a proposed rule change that would allow the listing and trading of options for Bitcoin exchange-traded funds (ETFs).
As stated in a notice on February 23, the New York Stock Exchange (NYSE) has requested a rule change that would permit the listing and trading of options for the Bitwise Bitcoin ETF (BITC), the Grayscale Bitcoin Trust (GBTC), and “any trust that holds Bitcoin.”
If approved, these options would be traded “in the same manner as options on other ETFs (including commodities ETFs) on the Exchange.” This means that they would be subject to various regulations, including listing criteria, expiration dates, strike prices, minimum price changes, position and exercise limits, margin requirements, and procedures for customer accounts and trading suspensions.
BlackRock, an asset manager, has also sought approval for a similar policy change. The company has filed for rule revisions to list options on its Bitcoin ETF in collaboration with the Chicago Board Options Exchange (CBOE). James Seyffart, an ETF analyst at Bloomberg, predicts that the SEC could make a decision on this matter by September 2024 at the latest.
Options are financial derivatives products that can be used for portfolio hedging, income generation, or speculative purposes. They give buyers the right, but not the obligation, to buy or sell a certain asset at a specified price on a certain date.
In the context of Bitcoin ETFs, options would enable investors to hedge their positions or speculate on the price movements of a BTC ETF, rather than directly investing in Bitcoin itself. The SEC has previously approved commodity ETFs held by trusts, such as the SPDR Gold Trust, iShares COMEX Gold Trust, iShares Silver Trust, and ETFS Gold Trust.
Michael Sonnenshein, the CEO of Grayscale, has been publicly advocating for regulators to approve crypto derivatives products. According to Sonnenshein, options are beneficial for investors as they facilitate “price discovery and can help investors better navigate market conditions or achieve desired outcomes, such as generating income.”
However, it is important to note that, like any other investment or financial product, options trading carries risks that may not be suitable for all investors. The SEC granted approval for the trading of spot Bitcoin ETFs on Wall Street on January 10, after years of rejections.
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