BlackRock Files for Bitcoin Fund With Partial Loss Protection

BlackRock has filed with the U.S. Securities and Exchange Commission to create an options-based Bitcoin fund intended to cushion some losses while limiting potential gains. The proposed iShares Bitcoin Managed Protection ETF, identified in the October 19 filing by the ticker PBIT, would gain Bitcoin-linked exposure through options rather than holding Bitcoin directly. The fund would use call options tied to BlackRock’s iShares Bitcoin Trust ETF, known as IBIT, or similar Bitcoin-linked assets, while also holding cash and short-term fixed-income investments. It would typically divide its positions among three overlapping options tranches, established at different times. Each tranche would combine purchased calls with calls sold at higher strike prices, helping offset the cost of the purchased options while restricting gains above specified levels. At the start of a typical tranche, purchased options would have a strike price near 90% of the reference asset’s value. That structure initially targets exposure to about 10% of the asset’s starting value to the downside, before fees and expenses. The figure describes an individual tranche at its outset, not a guaranteed limit on...