SEC hikes Bitcoin ETF options limit, OKs in-kind creation
On August 4, 2025, the SEC raised the single‐contract position limit for option‐enabled Bitcoin ETFs from 25,000 to 250,000 contracts. The change applies to BlackRock’s iShares Bitcoin Trust ETF (IBIT) but excludes Fidelity’s Wise Origin Bitcoin Fund (FBTC). This tenfold hike lets IBIT deploy covered call and other advanced options strategies. Research head Greg Cipolaro at NYDIG says these tactics can curb Bitcoin volatility, making the Bitcoin ETF more appealing to institutional investors and boosting spot demand.
The SEC also approved in-kind creation and redemption for crypto ETFs. Authorized participants can exchange actual coins instead of cash. Currently, only Jane Street and Virtu have the necessary crypto infrastructure. Others may need partnerships or acquisitions to compete. Traders should expect better arbitrage, deeper liquidity and increased options activity in the Bitcoin ETF market.
Overall, these regulatory moves mark a maturing ETF space. Higher options limits and in-kind mechanisms support lower volatility, stronger institutional flows and a constructive outlook for Bitcoin trading.
Bullish
Raising the Bitcoin ETF options limit tenfold and approving in-kind creation reduces volatility and enhances institutional access. In the short term, traders can expect increased options activity, tighter spreads and improved arbitrage. Over the long term, lower volatility and streamlined creation/redemption processes support sustained institutional inflows. These factors combine to underpin a bullish outlook for Bitcoin.