How To Buy And Sell Bitcoin ETF Options

Traders now have the ability to buy not only Bitcoin exchange-traded funds (ETFs) but also options on these Bitcoin funds. Bitcoin ETF options began to debut in late 2024, and now traders can buy and sell an even more volatile — and potentially lucrative — Bitcoin-based security. 

Here’s how to buy and sell Bitcoin ETF options and what you need to watch out for. 

How to trade Bitcoin ETF options

Bitcoin ETFs were officially approved and began trading in January 2024, while options on these Bitcoin funds were approved later in 2024. The advent of spot Bitcoin ETFs was a watershed moment, because it allowed traders to purchase the cryptocurrency without having to purchase it on a crypto exchange. By buying a spot Bitcoin ETF, traders could achieve virtually the same performance as owning Bitcoin directly. So if Bitcoin rises 2 percent, so does the Bitcoin fund. 

You have two major types of options if you plan to trade Bitcoin ETFs: 

• Call options: Call options give the owner the ability to purchase the underlying security (here the Bitcoin ETF) at a specific price for the life of the option contract. Calls increase in value as the Bitcoin fund rises, so you purchase them if you expect Bitcoin to rise.
• Put options: Put options give the owner the ability to sell the underlying security at a specific price for the life of the option contract. Puts increase in value as the Bitcoin fund falls, so you purchase them if you expect Bitcoin to fall. 

Buying options, either calls or puts, gives you the opportunity to multiply your money if Bitcoin moves in the right direction. You’ll pay a premium to purchase the option contract, and then you’ll have any rights conferred by the option contract until the option expires. Each option contract allows the owner to buy or sell 100 shares of the underlying stock or fund. 

In contrast, you can also sell Bitcoin ETF options and collect the premium from the options buyer. You’ll have the obligation to buy or sell the Bitcoin fund, depending on the type of option, at the predetermined price for the life of the contract. If the price of Bitcoin moves unfavorably, you may be forced to buy or sell the Bitcoin fund at a money-losing price.

Working with the best brokers for options trading can help keep your costs low while offering you tools to analyze your trades.

Which Bitcoin ETFs have options available?

Not all Bitcoin ETFs have been approved for options, so you can’t buy options on just any Bitcoin ETF. Here are the Bitcoin ETFs that currently allow options trading:

• iShares Bitcoin Trust (IBIT)
• Bitwise Bitcoin ETF (BITB)
• ARK 21Shares Bitcoin ETF (ARKB)
• Fidelity Wise Origin Bitcoin Trust (FBTC)
• Wisdom Tree Bitcoin Fund (BTCW)

Those without available options include Invesco Galaxy Bitcoin ETF (BTCO), Valkyrie Bitcoin Fund (BRRR), VanEck Bitcoin ETF (HODL) and Franklin Bitcoin ETF (EZBC).

An example of buying a Bitcoin ETF option

Let’s say you think Bitcoin is poised to rise in the next month. You could consider purchasing a call option, which will increase in value if Bitcoin rises by expiration. First, you’ll need to choose a Bitcoin ETF to buy options on. Let’s go with the iShares Bitcoin Trust. The fund currently trades at $55, and a call option for one month away with a strike price of $55 costs $3.55. 

The call entitles you to buy 100 shares of the fund at the strike price until the option expires in a month. In this example, the call costs $355, or $3.55 * 1 contract * 100 shares per contract. 

Your trade breaks even at $58.55, so if the fund reaches that price you’ll make money on the trade. For example, if the fund finishes expiration at $60, the call option is worth $5, while you paid $3.55 for it. So you have a net gain of $1.45, or a total of $145 per call contract. 

If it doesn’t reach the strike price, you’re a net loser on the trade. If the fund finishes expiration above the $55 strike price, the option will retain some value. For example, if the fund finishes expiration at $56, your call option will be worth $1, while you paid $3.55 for it. So the trade ends up losing a net $2.55, or a total of $255 per call contract. 

However, if the fund finishes below the $55 strike price at expiration — even just a penny — the call option expires completely worthless and you’re left with nothing. 

If Bitcoin really soars, you can make a bundle on the call options. For example, if the Bitcoin fund has risen to $70 — a gain on Bitcoin of about 27 percent — the value of the call would have been $15. That’s a gain of 322 percent from just a 27 percent rise in the underlying fund. 

Other strategies to play Bitcoin

Option traders have dozens of other strategies to play Bitcoin ETFs. Some of the best strategies let traders take advantage of Bitcoin’s notorious volatility and put money in their pocket. For example, a covered call strategy harvests the option premium, letting the trader profit from the high cost of Bitcoin options. 

In a covered call, the trader owns the underlying Bitcoin fund and then sells call options. The trader pockets the premium upfront and if the fund does not exceed the call’s strike price at expiration, the trader keeps the full premium and can repeat the strategy over and over again. 

The downside of the strategy occurs if the Bitcoin fund soars. The trader will be forced to sell the Bitcoin fund and miss out on the large gain that otherwise would have accrued to their account. You’ll want to understand the full details of the covered call strategy before you begin implementing it. 

What are the key risks and rewards of Bitcoin ETF options?

Trading options on Bitcoin ETFs magnifies the performance of the notoriously volatile Bitcoin.

Rewards of Bitcoin ETFs

• Magnified returns: Options magnify the returns on any price movement of Bitcoin. If Bitcoin moves a little bit, the value of options may soar. And Bitcoin is already highly volatile by itself, even before you add the much greater volatility of options into the mix.
• Lower capital at risk: With options you can put much less capital at risk on the trade and still enjoy the same level of return or more that you would if you purchased the ETF itself. With less capital at stake, you can reduce your potential downside if you trade well. 
• Multiple ways to play: Options give you many ways to play. You can wager straight on Bitcoin to rise or fall by buying call options or put options, respectively. Alternatively, you can sell options and collect the premium in exchange for a different set of risks. You can also combine options into basic options strategies or advanced options strategies. 

Risks of Bitcoin ETFs

• Total loss of investment or more: If you purchase options and the trade doesn’t work out, you’ll lose your entire investment. If you sell options, you may end up losing much more than you earned from the trade if the crypto price moves unfavorably. 
• Difficulty: Options can be a tough game to play. Not only does your thesis need to be right, but so does your timing. Once the option expires, the trade is settled up. Even if Bitcoin moves the way you’d hoped later, the trade is over and you have no recourse. 
• Even higher volatility: Bitcoin is already intensely volatile, making major moves when sentiment changes. When you stack options on top of that fundamental volatility, you end up with an investment that can whipsaw back and forth. 

Bottom line

Options on Bitcoin ETFs offer a way to supercharge the gains and losses of the already volatile cryptocurrency. So traders looking for action may be able to find it here, but those on the hunt for a safe long-term investment should tread carefully around Bitcoin ETF options.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.