BlackRock Files for Third Bitcoin ETF Using Options to Cap Gains and Losses

The world's largest asset manager is expanding its crypto lineup with a Bitcoin fund that uses options strategies to limit volatility, offering investors protection at the cost of capped upside.

BlackRock has filed with U.S. regulators for a third Bitcoin exchange-traded fund, this time employing options strategies designed to restrict both potential losses and gains. The move marks a significant shift from the firm's existing spot Bitcoin and Ether ETFs, which track the underlying assets directly without derivatives overlays.

The proposed fund would use options contracts — financial instruments that grant the right to buy or sell Bitcoin at predetermined prices — to create what's known as a 'collar' or 'defined outcome' strategy. This approach appeals to risk-averse investors who want Bitcoin exposure without the asset's notorious volatility, which has seen it swing more than 70% in single years.

BlackRock's IBIT, its flagship spot Bitcoin ETF launched in early 2024, has already accumulated over $30 billion in assets and led Monday's inflows with $665.2 million — the largest single-day haul in a month. Yet the new filing signals the firm believes a substantial market exists for investors willing to sacrifice unlimited upside in exchange for downside buffers.

The options-based structure could attract institutional investors and financial advisors bound by risk mandates that currently exclude direct crypto exposure. Traditional portfolios often limit allocations to assets exceeding certain volatility thresholds, and a capped Bitcoin fund may satisfy compliance requirements while still offering participation in the asset class.

Notably absent from BlackRock's filings are products tied to Solana, XRP, or other altcoins, despite competitor firms like Grayscale and Bitwise pursuing such instruments. The firm appears focused on Bitcoin and Ether, the two largest cryptocurrencies by market capitalization and the only digital assets approved by the SEC for spot ETF products to date.

For ordinary investors, the trade-off is stark: if Bitcoin surges 100%, a traditional spot ETF captures that full move, while an options-based fund might cap returns at 15-20% depending on its specific structure. Conversely, if Bitcoin crashes 50%, the options strategy could limit losses to 10-15%. The exact parameters will be detailed in the fund's prospectus once approved.

The filing comes as JPMorgan separately included Bitcoin in its long-term capital market outlook for the first time, projecting it to outperform U.S. stocks and gold over the next decade despite warning about volatility. Between BlackRock's product innovation and Wall Street's growing acceptance, Bitcoin is cementing its place in mainstream portfolios — even if that means wrapping it in protective layers that dilute its explosive potential.