- The iShares Bitcoin Managed Protection ETF, branded as PBIT, is expected to use options on IBIT as well as cash and short-term debt instruments. He will not purchase Bitcoin or IBIT units directly.
- Approximately 10% is the starting threshold for a single option series, not the investor’s guaranteed maximum loss. The moment of purchase, parameters of other series and costs are important.
- No fees or profit limits have been announced yet. The documents choose to enter into force after 75 days, but this is not a confirmed debut date.
What did BlackRock file?
According to Bloomberg Intelligence analyst James Seyffart, this is BlackRock’s third application for a bitcoin ETF, after IBIT and BITA launched in June.
How can options limit losses?
PBIT is intended to purchase call options on IBIT with an exercise price typically approximately 90% of the value of the instrument at the inception of the series. At the same time, he will sell call options with a higher strike price. They will set the limit beyond which the fund will no longer fully benefit from the IBIT growth.
The rest of the strategy consists of cash and short-term debt investments. The interest earned is intended to help cover the cost of the option.
The Fund typically plans to hold three overlapping series. Each month one is scheduled to expire and another one is scheduled to begin. Each will have its own starting level and profit limit. Therefore, the result of the entire portfolio will not be the same as the result of one series held from start to finish.
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Why can you lose more than 10%?
The protection threshold does not move automatically as prices increase. If you buy the fund after the IBIT increases, the distance from the current price to the protection level may be much greater than at the beginning of the series.
For example, the series starts at an IBIT price of $100 and the exercise price of the purchased options is $90. If IBIT increases to $120, a return to $90 means a drop of 25%, not 10%. This is an example of a change in the distance to the threshold, not a calculation of the PBIT unit loss.
BlackRock may also change parameters and exit positions before the option expires. Costs and market conditions may weaken protection. The prospectus allows for the loss of part or all of the investment.
When can the fund launch and how much will it cost?
The profit limit of each series is to depend on the conditions on the options market at the time of its launch. No specific PBIT levels or fees have been announced yet. The 0.65% rate applicable in BITA is not an indication of the costs of the new fund.
The documents indicated entry into force 75 days after submission. Counting from October 19, this deadline is January 2, 2027. However, the procedure may change, and the entry into force of the documents does not mean the automatic start of trading.
Calamos, First Trust and Innovator already offer similar protection strategies. Their levels of protection, settlement periods and limits may vary, so they are not interchangeable.
Conclusion after two weeks of outflows from ETFs
In the two weeks preceding the submission of documents, a net outflow of approximately $910 million was made from US spot Bitcoin ETFs. The outflows coincided with concerns about inflation and further interest rate increases. This is the withdrawn capital, not the amount of funds lost due to a change in exchange rate.
On Monday, October 19, the situation was reversed. IBIT attracted approximately USD 665 million and was the only one of the group of 12 funds to record a net inflow. This amount does not mean the result of the entire market, because some other products recorded outflows.
What will be important before purchasing?
In PBIT you will need to check the parameters of all current series, not just the protection password. The growth limit will show how much of the potential profit the investor gives up. The fees and current distance from the protection thresholds will help you assess what you’re getting in return.
Availability from a Polish broker requires separate confirmation. The mere access of an account to US stock exchanges does not mean that a given US ETF will be offered to a Polish retail client.
