IBIT options launched on Tuesday, and market participants widely expect this move to attract more institutional interest in Bitcoin (BTC). Here are the potential impacts on the market.

On the first trading day, the notional exposure of IBIT options approached $2 billion, which is an unusual trading volume for new options. The trading volume of call options was higher than that of put options (with a ratio of 4.4:1), which may be a reason for BTC hitting new highs.

The introduction of IBIT options is expected to increase institutional participation in Bitcoin, as options provide new avenues for investment and risk management strategies.

Trading options on IBIT can enhance liquidity, offer hedging tools, and allow speculation on BTC price movements, thereby affecting market dynamics and leading to changes in market structure.

The options linked to the BlackRock Bitcoin exchange-traded fund IBIT accumulated nearly $2 billion in notional exposure upon debut, a feat that some analysts termed 'unprecedented' in these metrics.

"The notional exposure on the first day of options was slightly below $1.9 billion, traded through 354,000 contracts. Of these, 289,000 were call options and 65,000 were put options," Bloomberg Intelligence analyst James Seyffart stated in an X post. "The ratio is 4.4:1."

"These options are almost certainly part of #Bitcoin hitting an all-time high today," Seyffart added, noting Bitcoin's new high after hours in the U.S. on Tuesday.

IBIT options launched on Tuesday, and market participants widely expect this move to attract more institutional interest in Bitcoin (BTC). In September, the SEC approved options for several of the 11 spot Bitcoin ETFs across multiple exchanges, with more options products expected to launch in the coming days.

Expand Options

Options are a financial derivative that gives the buyer the right, but not the obligation, to purchase (call option) or sell (put option) the underlying asset at a specified price on or before a certain date.

Call options give the holder the right to purchase an asset at a specified price (known as the strike price) within a specified period. Put options give the holder the right to sell at the strike price within a designated time frame.

Call options are purchased when an increase in price is expected; if the prediction is correct, traders can exercise the option to buy or sell at the strike price for profit. Put options can serve as insurance against price declines or bets on a downturn, allowing sales at the strike price if the price exceeds market value.

How IBIT options change the BTC market structure

Using options can open up a wide range of trading strategies for professional investors—this could bring more liquidity to the market and influence market structure.

Institutions that are particularly reluctant to trade through unregulated offshore channels can use IBIT options to hedge against bullish risks while selling call options to generate additional income. Speculators can use IBIT call and put options to profit from price fluctuations while avoiding the hassle of owning the underlying asset.

Traders can also sell options and earn premiums, which is a form of passive income that is particularly attractive in stable or slowly declining markets, as options may expire worthless. Such strategies have already gained popularity among traders compared to leading options exchange Deribit.

Regarding the impact on market structure, some analysts believe that the anticipated coverage of IBIT call options will suppress long-term implied volatility. In the short term, especially during bullish markets, demand for call options may lay the groundwork for a GameStop-style gamma squeeze.

Market structure describes in simple terms how trading involves participants such as investors and traders, how assets are bought and sold, and the regulation of specific asset classes.

Options provide more ways to trade, making it easier for professional investors to buy or sell when prices do not change significantly. Tracking options data can show what traders expect price changes to occur, helping everyone understand market expectations.

Near expiration dates, options can also predict and cause price fluctuations—creating a window for short-term trading.

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