BlackRock is looking to launch options on Ethereum ETFs. What does this mean for the market?

Nasdaq and BlackRock, the world's largest asset manager, plan to start trading options on the ethereum spot ETF.

According a presentation published in the On the website of the US Securities and Exchange Commission, representatives of Nasdaq and BlackRock asked the The regulator will allow options trading on the iShares ethereum Trust ETF (ETHA), the only ethereum-based ETF listed on the Nasdaq exchange.

The published document proposes to change the rules for listing and trading options on the iShares ethereum Trust. The exchange offers to expand the list of ETFs eligible for trading on the exchange according to options by including the Trust.

The eth in the trust is subject to ethereum proof-of-stake validation or is used to earn additional eth or generate income or other profits.

Comments on the proposal from Nasdaq and BlackRock are accepted within 21 business days. Meanwhile, Bloomberg Intelligence analyst James Seyffart believes that the final decision on this application will not be made before April 2025.

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The expert explained that BlackRock needs approval from the SEC, the Commodity Futures Trading Commission and the Options Clearing Corporation to trade options on the ethereum (eth) ETF.

At the same time, Nasdaq is still waiting for approval to trade options on bitcoin (btc) spot ETFs. In July, the SEC said it needed more time to make a decision on this class of products.

<h2 class="wp-block-heading" id="how-does-spot-ethereum-etf-options-trading-work”>How does ethereum ETF spot options trading work?

Options are contracts that allow the buyer of the option to buy or sell the underlying asset at a specific time and price.

Options are used by retail investors for speculation and short-term transactions, as they have a high profit potential and possible losses are limited: when buying an option, one cannot lose more than the amount of the option premium. At the same time, options allow one to make money on the growth and fall of assets.

BlackRock’s options offering will provide investors with an additional, relatively inexpensive investment vehicle to purchase eth on the spot and a hedging tool to meet their investment needs.

In other words, the new product will offer those who want to interact with digital assets another way to do so. Since the cost of interacting with them is relatively low, there will surely be demand for options.

<h2 class="wp-block-heading" id="ethereum-spot-et-fs-receive-approval”>ethereum spot ETFs receive approval

Since a spot bitcoin ETF was approved in January, many financial institutions, including financial giants BlackRock and Fidelity, have been seeking approval to create cryptocurrency exchange-traded funds. Their goal was to allow investors to trade ethereum in the form of fund shares without having to deal directly with the cryptocurrency.

On May 23, the SEC approved the launch of an ethereum spot ETF in the US. BlackRock, 21Shares, Bitwise, Fidelity Investments, Franklin Templeton, VanEck, and Invesco Galaxy received approval from the regulator.

eth-ETF products began trading on July 23. In the first 15 minutes, the sector recorded a trading volume of $112 million.

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Amid the cryptocurrency market crash on August 6, total inflows into eth ETFs amounted to $98.3 million, the second highest since the products were approved, according to eth-spot” target=”_blank” rel=””>SoSoValue.

BlackRock Options Strategies

BlackRock introduced two new ETFs that use options strategies in the spring. The new funds use a covered call option strategy on U.S. stocks.

The first, the iShares S&P 500 BuyWrite ETF (IVVW), focuses on large-cap stocks. The fund tracks the performance of an index that reflects a strategy of owning 500 large-cap U.S. stocks while simultaneously writing (selling) one-month call options for income.

The second, the iShares Russell 2000 BuyWrite ETF (IWMW), is a small-cap ETF. The fund tracks the performance of an index that reflects a strategy of owning 2,000 small-cap U.S. stocks while simultaneously writing (selling) one-month call options for income.

With the launch of the new products, investors began receiving monthly income from the option premiums earned under their strategies and the potential appreciation of the stock prices they track, up to a specified limit.

Should BlackRock approve the new product?

BlackRock has virtually no history of rejecting ETFs and the giant has over $9 trillion in assets under management. Therefore, the company's desire to launch a new cryptocurrency-based tool will likely end in success, attracting clients and their capital to the industry.