BlackRock's Historic Bitcoin ETF Options Day 1

BlackRock’s Bitcoin ETF options made a historic debut, recording nearly $1.9 billion in notional value traded on the first day.

BlackRock’s (NYSE:BLK) Bitcoin ETF options made a historic debut on Friday, recording nearly $1.9 billion in notional value traded on the first day.

As the market opened, traders wasted no time in exploring the newly available options chains. Among the key observations made by Bitwise Invest’s Head of Alpha Strategies Jeff Park throughout the trading day were:

The market quickly established a “volatility smile” by 9:45 AM, which persisted and widened as the day progressed. In fact, the smile got even wider throughout the day, finishing with higher wings by EoD.

Analyzing the BVIV Index from Volmex Finance, we can see that the implied volatility (IV) movements did not align predictably with Bitcoin’s price trajectory. More interestingly, it did NOT match the upward sloping BTC price movement (then down) in a predictable way.

The most heavily traded contract was the 01/17/24 C55 call option, exceeding 40,000 contracts. As I shared yesterday, the 25k limit is too small relative to the deep liquidity IBIT has demonstrated over the months.

We can also see a true lottery ticket in the 12/20/24 C100 call option, which is trading at an implied volatility of 105% and a delta of just 3%. This option saw heavy volume early in the trading day. The implied vol cleared at 105%. Even more interesting was how heavy the volume was at the first hour of the market open. It means a serious investor was loading it up at 10AM, and the price steadily increased with vol getting bid up. This was likely the been the biggest vega opportunity of the day.

The overall put/call ratio stood at approximately 0.23, indicating a strong preference for call options over puts. However, what is even more interesting is if you segment it by Expiry Date. Longer-dated expiries, such as the January 2026/2027 contracts, exhibited an even lower put/call ratio of 0.08. That means there is roughly a 10x imbalance for upside, highlighting an extremely bullish sentiment.

Contrary to some expectations, MicroStrategy’s (NASDAQ:MSTR) options trading remained robust despite the launch of IBIT options. MSTR’s vol decoupled with Bitcoin meaningfully in the last hour, where it closed even higher than where we started in the day. MSTR is in its own league.

As we look ahead, we can expect the launch of BITB options, which will provide another option chain alongside IBIT and others for investors to consider before buying/selling and determining where the best value may lie. I believe non-institutional trading will gravitate toward non-IBIT ETFs, which could present more opportunities for professional retail investors.

Bloomberg ETF expert James Seyffart also provided additional commentary on the massive trading volumes, noting that the final tally of IBIT’s 1st day of options is just shy of $1.9 billion in notional exposure traded via 354k contracts. Of these, 289k were Calls & 65k were Puts. That’s a ratio of 4.4:1. I suppose that helped propel Bitcoin to new all-time highs during the day.

When crypto analyst James Van Straten queried about the notional target and position limits, Seyffart acknowledged the constraints, adding that the 25k position limit is likely a weight on volume and Open Interest for [the] foreseeable future.

As for the rationale behind the limits, Seyffart noted that it’s not standard, but the SEC and CFTC were definitely worried about market manipulation etc. Was part of the requirement to get approved!

At press time, BTC traded at $93,404.