Analysis: Bitcoin spot ETF options trading will increase market liquidity and reduce volatility

Odaily Odaily: Nate Geraci, president of The ETF Store, expects that once Bitcoin spot ETF options trading begins, there will be a "series" of new applications, such as "Bitcoin buffer or defined outcome ETFs, Bitcoin premium income or yield max ETFs, Bitcoin tail risk ETFs, and Bitcoin convexity ETFs, etc." At the same time, Eric Balchunas, senior ETF analyst at Bloomberg, said it will attract more liquidity, which in turn will "attract more large participants." Retail traders typically use options for speculation, while large institutions use options for hedging. Market structure analyst Dennis Dick said that Bitcoin has a large retail following, which means that there may be more speculation in Bitcoin ETF options compared with stock ETF options. "Contrary to popular belief, options actually reduce volatility," Dick said in an email. "As open interest increases, it creates natural buyers and sellers on both sides of the market... This adds liquidity to the market, which reduces volatility." Because of this, Dick expects that as interest in Bitcoin ETF options trading increases, the volatility of the ETF's underlying assets (i.e., Bitcoin) will decrease. (The Block) Earlier news, the U.S. SEC has approved Nasdaq to list and trade Bitcoin spot ETF options. Nasdaq said the exchange will treat Bitcoin ETF options similarly to other ETF options, subject to the same rules and trading procedures. The SEC's notice stated that "IBIT options will be physically settled in an American-style exercise manner." This means that options can be exercised at any time before expiration.