Institutional investors are increasingly using BlackRock's iShares Bitcoin Trust (IBIT) for income generation through covered-call strategies. Options open interest on IBIT has reached nearly seven million contracts, equivalent to about $44 billion in notional value. This shift highlights a move from speculative trading to steady yield harvesting from Bitcoin's volatility.
The options market for BlackRock's iShares Bitcoin Trust (IBIT) has grown significantly, with open interest nearing seven million contracts. This translates to roughly $44 billion in notional exposure, where call positions dominate with a put-to-call ratio of 0.40. Activity is concentrated in strikes from $65 to $75 and expiries in late October and November, aligning with systematic covered-call writing strategies.
Investors hold IBIT shares for Bitcoin exposure and sell short-dated, out-of-the-money calls to capture premiums. Max pain levels for near-term expiries are in the mid-$60 range, near IBIT's current price of about $63, indicating a focus on income over directional bets. In the offshore market on Deribit, Bitcoin options show dominance by far-out-of-the-money calls at $120,000 to $210,000 and puts at $80,000 to $100,000, with $46.6 billion notional exposure far exceeding the $1.6 billion in at-risk premiums.
Futures markets reflect this calmer environment, with annualized basis premiums in the low- to mid-single digits, down from double-digit levels in 2021. The covered-call approach involves selling one-month calls about 10 percent above the market price, yielding 12-20 percent annualized depending on volatility. This appeals to institutions like mutual funds and pensions seeking regulated exposure via a 40 Act ETF.
Bitcoin's 30-day realized volatility has dropped roughly 60 percent over the past quarter, partly due to heavy short-call supply and dealer hedging that moderates price swings. Despite a $100.7 million outflow from IBIT on October 20, options volume and open interest remained stable around the same strikes. This persistence underscores the strategy's independence from daily sentiment, transforming Bitcoin into a yield-generating asset within traditional finance.