Nasdaq and BlackRock, the world’s largest asset manager, are planning to start trading options on the spot Ethereum ETF.
Table of Contents
How does spot Ethereum ETF options trading work?
Ethereum spot ETFs receive approval
BlackRock options strategies
Should BlackRock approve the new product?
According to a filing posted on the U.S. Securities and Exchange Commission’s website, representatives of Nasdaq and BlackRock asked the regulator to allow trading options on the iShares Ethereum Trust ETF (ETHA), the only Ethereum-based ETF listed on the Nasdaq exchange.
The published document proposes changing the rules for listing and trading options on the iShares Ethereum Trust. The exchange offers to expand the list of ETFs suitable for trading on the exchange in accordance with options by including the Trust.
Trust’s ETH becomes subject to the Ethereum proof-of-stake validation or is used to earn additional ETH or generate income or other earnings.
Comments on the Nasdaq and BlackRock proposal are accepted within 21 business days. Meanwhile, Bloomberg Intelligence analyst James Seyffart believes that the final decision on this application will not be made before April 2025.
Nasdaq and BlackRock's filing to add options on Ethereum ETFs has hit the SEC site. Final SEC decision on this from SEC likely to be around April 9th, 2025.(SEC is not the only decision maker on adding options here. Also need signoff from OCC & CFTC) https://t.co/K4HunUPp7S pic.twitter.com/5kQH0mljTz
— James Seyffart (@JSeyff) August 6, 2024
The expert explained that BlackRock needs approval from the SEC, the Commodity Futures Trading Commission, and the Options Clearing Corporation to trade options on the spot Ethereum (ETH) ETF.
At the same time, Nasdaq is still waiting for approval to trade options on spot Bitcoin (BTC) ETFs. In July, the SEC said it needed more time to decide on this class of products.
How does spot Ethereum ETF options trading work?
Options are contracts that allow the option buyer to buy or sell the underlying asset at a specified time and price.
Retail investors use options for speculation and short-term transactions, as options have a high potential return, and the possible loss is limited: having bought an option, you cannot lose more than the amount of the option premium. At the same time, options allow them to earn money for growth and the fall of assets.
BlackRock‘s options offering will provide investors with an additional and relatively inexpensive investment vehicle for purchasing ETH on the spot and a hedging tool to meet their investment needs.
In other words, the new product will give those who want to engage with digital assets another way. Since the cost of interacting with them is relatively low, options will surely be in demand.
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Ethereum spot ETFs receive approval
Since the January approval of a spot Bitcoin ETF, many financial institutions, including financial giants BlackRock and Fidelity, have been seeking approval to create cryptocurrency exchange-traded funds. Their goal was to allow investors to trade Ethereum in the form of fund shares without having to deal with the cryptocurrency directly.
On May 23, the SEC approved the launch of a spot Ethereum ETF in the U.S. BlackRock, 21Shares, Bitwise, Fidelity Investments, Franklin Templeton, VanEck, and Invesco Galaxy received the regulator’s approval.
The ETH-ETF products began trading on July 23. In the first 15 minutes, the sector saw $112 million in trading volume.
Here's volume after first 15 minutes of trading. Total of $112m traded for the group (which is A TON vs a normal ETF launch but only about half of what bitcoin ETFs' volume pace was on DAY ONE, altho 50% would exceed expectations IMO). Also Bitwise outperforming early. pic.twitter.com/RoN9J1VoP1
— Eric Balchunas (@EricBalchunas) July 23, 2024
Amid the crypto market collapse on Aug. 6, total inflows into ETH ETFs amounted to $98.3 million — the second result since the products were approved, according to SoSoValue.
Source: SoSoValue
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BlackRock options strategies
BlackRock introduced two new ETFs that use options strategies in the spring. The new funds use a covered call strategy on U.S. stocks.
The first, the iShares S&P 500 BuyWrite ETF (IVVW), focuses on large-cap stocks. The fund tracks the performance of an index that reflects a strategy of owning 500 large-cap U.S. stocks while writing (selling) one-month call options for income.
The second, the iShares Russell 2000 BuyWrite ETF (IWMW), is a small-cap ETF. The fund tracks the performance of an index that reflects a strategy of owning 2,000 small-cap U.S. stocks while writing (selling) one-month call options for income.
With the launch of the new products, investors began to receive monthly income from the option premiums earned under their strategies and potential price appreciation on the stocks they track — up to a specific limit.
Should BlackRock approve the new product?
BlackRock has virtually zero history of rejecting ETFs, and the giant has more than $9 trillion in assets under management. Therefore, the company’s desire to launch a new crypto-based tool will most likely end in success, which will attract clients and their capital to the industry.
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