Cboe is returning to its roots with its new range of options products, designed to offer investors protection against downside risk and diversification in their portfolios of crypto-based products.
Last week, ETF Express reported the launch of the first downside-protected bitcoin ETF suite, in partnership with Calamos, designed to enable investors to gain exposure to bitcoin while limiting the risks of volatility.
Cboe’s Bitcoin U.S. ETF Index (CBTX) options and Cboe Mini Bitcoin U.S. ETF Index (MBTX) options are available to investors to both hedge and capitalise on market movements.
The uptake of spot bitcoin ETFs in the US since achieving regulatory clearance in January of 2024 has been quite breathtaking. Joshua de Vos, Research Lead at CoinDesk, wrote in our latest monthly column on digital currency ETPs, supported by data from Trackinsight, that in 2024, the United States dominated bitcoin activity, with ETFs and ETPs in the region recording USD84 billion in inflows, representing 98 per cent of global flows.
Global digital assets: The month in review
Rob Marrocco, Vice President and Global Head of ETP Listings at Cboe, says: “We were always expecting quite a level of adoption, so we were proud to work with the majority of managers who launched spot bitcoin ETFs in the US.
“We knew there would be pent up demand but none of us could have foreseen the assets that amassed in the year. It was a multi-year investment of time and resources with the regulators to get to approval, so we were pleased to see the tremendous growth and how these products have opened the door for the 2.0 ETF, such as the Calamos product that came in last week. We are very excited to see what is next.”
Rob Hocking, Senior Vice President and Global Head of Product Innovation at Cboe, says: “The evolution made sense when we could take an asset class like bitcoin, and through transparency, centralised clearing and regulation, create a safe environment. For investors, they feel they have the protection and view it as just another ticker in their account, which gives them comfort.”
Over the last five years, the S&P 500 has experienced volatility levels around 20 per cent while bitcoin’s historic volatility is closer to the mid-50s. Hocking says that bitcoin brings diversity to portfolios, adding that the development of crypto products has brought in more and more ETF issuers. “It grows our sandbox for new product development.
“We now have more than 10 different ETPs tracking bitcoin performance, which allows us to design products to expand the tradable product ecosystem. We expect the evolution of the listed market for bitcoin will evolve much like it did for the equities space, with single names coming first, then index products, followed by other products. And now, we’re asking: ‘How do we create that ecosystem for a different asset class, like bitcoin?”
“We can offer Flex options – a big driver for Calamos and defined outcome products – with the same exposure to bitcoin but within a different eco system. One of the hardest things in developing any new market is product diversification for liquidity providers. But as available products grow, liquidity providers now have multiple products to diversify their exposure thus raising the liquidity available across the eco system. Our goal is continuing to build products that offer diverse risk exposures across various asset classes, tradable at any time, in any size, and accessible to all types of investors.”
Marrocco says that as the eco system continues to develop around those ETFs that came to market last January, it only leads to democratisation of those strategies.
“As the derivatives eco system continues to expand, ETPs with more sophisticated strategies will be created.”
Hocking notes that Cboe celebrated its 50th anniversary in 2023. “You would think that we are already very mature, but Cboe is primed for even more growth in the years to come. If investors are not used to trading options, they are using ETFs to gain options exposure. So, it’s a long-only asset but one that benefits from options trading. The options market as a whole will continue to grow as investors get more comfortable with these products – it’s an exciting time.”
Bitcoin’s supremacy in the ETF world is undoubted but what of a crypto winter? Hocking says: “When the crypto winter comes, it will be all the more important to have those options to remove that risk. If you see a pull-back in that market, optionality becomes even more important.”
Looking forward, Marrocco says that there will be new spot ETP filings on the horizon, all subject to regulatory approval. “It’s very early innings at the moment but bitcoin will continue to be the juggernaut and I wouldn’t be surprised to see the industry expand over 2025.”
