Nasdaq (NDAQ.O) has officially sought approval from regulators to launch and trade options on a Bitcoin index, the exchange operator announced on Tuesday.
This move marks an effort to provide institutional investors and traders with an alternative means of hedging their exposure to Bitcoin, the world’s largest cryptocurrency, according to Reuters.
The U.S. Securities and Exchange Commission (SEC) has yet to approve options based on any individual exchange-traded funds (ETFs) tied to spot Bitcoin prices, which made their debut earlier this year. Among the pending applications is Nasdaq’s request to trade options on BlackRock’s (BLK.N) $21.3 billion iShares Bitcoin Trust ETF (IBIT.O).
Proposed Bitcoin Index Options
The proposed Nasdaq Bitcoin Index Options would offer listed derivatives, giving traders a cost-effective and efficient way to increase their exposure to Bitcoin. These options would track the CME CF Bitcoin Real-Time Index, developed by CF Benchmarks, which monitors Bitcoin futures and options contracts available on the CME Group’s exchange (CME.O).
Matt Hougan, Chief Investment Officer of Bitwise, a firm involved in bringing Bitcoin ETFs to the market, emphasized the importance of these options: “It’s important for options on Bitcoin to be available for this asset class to be fully normalized. We’re missing a part of the liquidity picture that ETF options would provide.”
The Role of Options in Bitcoin Trading
Options are listed derivatives that provide the holder with the right to buy or sell an asset, such as a stock or an exchange-traded product, at a predetermined price by a set date. They offer a cost-effective way for traders to amplify their purchasing power, while institutional investors often use them to hedge against risk.
As regulators consider whether to approve options on the new spot Bitcoin ETFs, traders have turned to alternative products, such as leveraged ETFs tied to Bitcoin and options on those funds.
Exchanges have been actively applying for spot Bitcoin ETF options since it became clear that the SEC would approve the underlying ETFs in January. However, in response to SEC feedback, these applications have been withdrawn and refiled in recent weeks, according to sources familiar with the situation.
