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Gain Exposure to Bitcoin with Cboe’s Bitcoin ETF Index Options
Cboe launched the first SEC-regulated cash-settled index options related to the price of spot Bitcoin (Ticker: CBTX) for trading exclusively on Cboe Options Exchange in December 2024. Mini Bitcoin U.S. ETF Index Options (Ticker: MBTX) are available to trade at 1/10th the notional value of the standard options appealing to portfolios of all sizes.
Read MoreKey Takeaways
- Cboe launched the first U.S. spot Bitcoin ETF Index Options related to the spot price of Bitcoin
- Bitcoin ETF Index Options and Mini Bitcoin ETF Index Options trade on Cboe Options Exchange under ticker CBTX and MBTX
- The new Bitcoin ETF Index Options provide benefits for traders who want to gain exposure to spot Bitcoin ETFs without having to hold Bitcoin.
- There is a strong correlation of 0.9990 between the new Bitcoin ETF Index and Bitcoin enabling participants to use Cboe’s Bitcoin ETF Index Options to hedge Bitcoin.
Cboe launched the first SEC-regulated cash-settled index options related to the price of spot Bitcoin (Ticker: CBTX) for trading exclusively on Cboe Options Exchange in December 2024. Mini Bitcoin U.S. ETF Index Options (Ticker: MBTX) are available to trade at 1/10th the notional value of the standard options appealing to portfolios of all sizes.
Bitcoin ETF Index Options are cash settled and European-style exercise, meaning they can only be exercised on the expiration date. FLEX options are also offered on both the standard and mini Bitcoin ETF Index options, providing additional opportunities to create diversified trading strategies with exposure to Bitcoin. The new options leverage several strengths of the Cboe ecosystem, including ETP listings, index creation and index option trading and serve both retail and institutional investors.
Benefits
The ability to gain exposure to Bitcoin without holding the asset gives participants more flexibility in their trading strategies and provides a tool for traders to hedge Bitcoin.
Additionally, index options are cash-settled, which removes the complexity of physical delivery of Bitcoin and helps mitigate risks for those who cannot hold Bitcoin itself.
Correlation with Bitcoin
Source: Cboe Internal Data
Source: Cboe Internal Data
There is a strong correlation between the Cboe Bitcoin ETF Index and Spot Bitcoin Price Index, making the index options a reliable way to gain exposure to Bitcoin price changes.
Similarly, the chart above shows the daily return correlation between Cboe Bitcoin ETF Index and Bitcoin between January 19, 2024 and November 15, 2024. Over that 10-month period, the Cboe Bitcoin ETF Index consistently tracks Bitcoin closely, with a correlation of 0.9990 since inception. Cboe’s Bitcoin ETF Index options are a way to capture and hedge Bitcoin price movements while behaving similarly to other familiar index options.
Trading Strategies
There are many ways to incorporate Bitcoin ETF Index options in a portfolio. Here are two potential strategies traders can implement to use CBTX to gain exposure to Bitcoin.
Out-of-the-Money (OTM) Call Options
If a trader thinks the price of Bitcoin is likely to dramatically increase in the next month, they may elect to purchase an out-of-the-money (OTM) call option expiring at the end of the month. For example, if spot Bitcoin is near $98,600 in January and the Bitcoin ETF index is near 234, the 270 strike calls in MBTX are 15% out of the money. With the January 31 expiration contract offered at $4.10, a buyer of one contract would need the MBTX index to close higher than $274.10 on January 31 in order to profit. That trader could reduce the cost of their investment but cap potential profit by doing a long vertical call spread rather than an outright call.
Put Options
If a trader wishes to hedge but not close out an existing long Bitcoin position, they may look to buy a put option. A sizable move down in Bitcoin would cause the put option to increase in price, thereby offsetting some of the loss from the long spot position.
With new innovative products like Cboe’s Bitcoin ETF Index Options, Cboe continues to make markets more accessible. Participants have more exposure to different markets allowing them to diversify their portfolios and use Cboe’s ecosystem to their fullest potential. Learn more about Cboe’s products and offerings here.
The information provided is for general education and information purposes only. No statement provided should be construed as a recommendation to buy or sell a security, future, financial instrument, investment fund, or other investment product (collectively, a “financial product”), or to provide investment advice. There are important risks associated with transacting in any of the Cboe Company products or any of the digital assets discussed here. Before engaging in any transactions in those products or digital assets, it is important for market participants to carefully review the disclosures and disclaimers contained at: https://www.cboe.com/us_disclaimers/.