Options on BlackRock’s iShares Bitcoin Trust ETF (IBIT) made waves on Nov. 19, when its newly launched market recorded $1.9 billion in trading volume. On X, a handful of analysts deemed the launch a success, after the day wrapped up with a startling imbalance in the contracts.
There were 288,740 call (buy) options compared to the 64,970 put (sell) instruments, or a staggering 4.4-to-1 ratio.
On the surface, this suggests overwhelming bullish sentiment, with some contracts implying Bitcoin (BTC) prices above $170,000. But is this optimism warranted, or are these trades more complex than they appear?
How are IBIT Bitcoin options being used?
The options are financial instruments that allow traders to bet on price movements or hedge risks without buying the underlying asset directly.
Among IBIT options, the $100 call expiring on Dec. 20 saw a surprising 9,500 contracts traded. At first glance, this suggests traders are betting on Bitcoin skyrocketing. However, these contracts are priced at just $0.15 each, or 0.3% of IBIT’s current price of $53.40. This pricing indicates a low probability of Bitcoin hitting the implied $175,824 equivalent price.
Some investors use these low-cost options as lottery tickets. While eye-catching, these contracts often distort the perception of market sentiment.
IBIT ETF options price on Nov. 20. Source: Nasdaq
For a more grounded example, consider the $65 IBIT call option expiring on Jan. 17, priced at $2.40 per contract (4.5% of IBIT’s price). This trade becomes profitable if Bitcoin reaches approximately $114,286 by expiry, reflecting a 22% rise in two months.
Meanwhile, sophisticated traders might use strategies like a synthetic long. One user, “elwalvador,” shared an example: selling a $50 put and buying a $60 call for the same price ($2.15), effectively replicating Bitcoin ownership without holding the asset.
Other strategies include a covered call, where an investor holding IBIT sells a call option to generate immediate income. For instance, with IBIT trading at $53.40, they could sell a $55 call option expiring in January for $5.20. This means the investor…
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