BlackRock’s iShares Trust filed for a Bitcoin (BTC) exchange-traded fund that would use options to soften declines while giving up some gains, a trade-off that would still leave shareholders exposed to substantial losses.
The Oct. 19 amendment with the U.S. Securities and Exchange Commission (SEC) identifies the proposed iShares Bitcoin Managed Protection ETF as PBIT. Its strategy centers on call options linked to BlackRock’s iShares Bitcoin Trust ETF (IBIT), which seeks to reflect Bitcoin’s price, or similar Bitcoin exposure.
PBIT would buy calls and sell others with higher strike prices. The sales would help pay for the purchased contracts, but would also limit gains for each group of options. The fund would hold cash and short-term fixed-income investments alongside those contracts. Its Bitcoin exposure would come through options, without direct holdings of Bitcoin or Bitcoin exchange-traded products.
The options would usually be divided into three overlapping groups. In each group, purchased calls would typically have a strike price near 90% of the reference asset’s value when the position begins. That would expose about 10% of its starting value to losses before fees and expenses.
Those percentages describe an individual group at its start, not the outcome for someone buying PBIT shares. Because the groups would begin at different times, shareholders would have neither a guaranteed loss limit nor a fixed cap on gains. The prospectus warns that investors could lose their entire investment.
IBIT had $65.7 billion in net assets as of Oct. 19, iShares reported. The PBIT filing says its use of IBIT options could bring additional assets into IBIT, indirectly increasing fees paid to BlackRock Fund Advisors and its affiliates.
BlackRock already offers the iShares Bitcoin Premium Income ETF (BITA), which seeks income by selling options on IBIT. PBIT’s proposed strategy would pair options sales with purchased calls intended to cushion declines, while investors would bear remaining losses and expenses.
The filing has yet to specify a management fee, listing exchange or launch date. It selects an effective date 75 days after filing, and PBIT shares cannot be sold until the registration takes effect.
