Hedgeye has filed for a “Hedged Bitcoin” ETF that may mix publicity to identify ETFs with an choices overlay designed to scale back volatility and handle draw back threat. Bloomberg ETF analyst James Seyffart flagged the submitting on X, calling it a brand new try and bundle BTC publicity in a extra defensive wrapper.
“WOAH — NEW: Hedgeye ‘Hedged Bitcoin’ ETF was just filed,” Seyffart wrote. He added that, in keeping with the submitting, the product would “hold spot Bitcoin ETFs and use options strategies to reduce vol and downside risk.”
The proposed fund is known as the Hedgeye Hedged Bitcoin ETF and would commerce below the ticker HBIT on NYSE Arca, Inc., in keeping with the prospectus excerpt shared by Seyffart. The doc stays preliminary, stating that the knowledge “is not complete and may be changed,” and that the securities will not be offered till the registration assertion filed with the Securities and Alternate Fee turns into efficient.
Bitcoin Publicity With A Threat Overlay
The core construction is easy: the fund seeks Bitcoin publicity via ETPs and ETFs, whereas utilizing choices to dampen volatility and restrict draw back. The prospectus says the fund goals “to reduce volatility and manage downside risk through an options strategy that involves the purchase and/or sale of put and call options” primarily based on Hedgeye Threat Administration, LLC’s proprietary alerts.
These alerts are described as “Risk Range” alerts, which the submitting says are used to develop market entry and exit factors for investable belongings. In observe, the ETF wouldn’t merely purchase and maintain Bitcoin-linked merchandise. It will alter its choices positioning primarily based on market circumstances, implied volatility, Bitcoin worth traits, liquidity, and different elements decided by the adviser.
“The Fund will utilize options on shares of Reference ETPs and/or on indexes or ETPs and ETFs that provide exposure to Bitcoin price movements,” the submitting states. “The Fund’s options strategy is designed to reduce volatility and manage downside risk while maintaining exposure to the performance of Bitcoin through investments in ETPs and ETFs.”
That language places HBIT in a rising class of crypto merchandise aimed not at maximizing uncooked upside, however at altering the return profile of Bitcoin publicity. For allocators, the related pitch shouldn’t be merely entry to BTC, which is already accessible via spot ETFs, however a rules-based overlay meant to make that publicity extra tolerable throughout drawdowns.
Draw back Safety, However With A Commerce-Off
The submitting is express that the hedge comes with a price. The fund’s choice positions are “designed to provide downside protection,” however may additionally imply “frequently foregoing some upside potential.” That’s the central trade-off within the technique: traders could get a smoother experience in antagonistic markets, however they might additionally surrender a part of Bitcoin’s upside throughout sturdy advances.
“The premiums received from writing options are intended to provide income to offset the cost of buying options,” the submitting says. The fund could purchase and write each standardized exchange-traded choices and Versatile Alternate Choices, or FLEX Choices, that are exchange-listed contracts with customizable phrases similar to strike worth and expiration date.
The prospectus additionally notes that each standardized exchange-traded choices and FLEX Choices are assured for settlement by the Choices Clearing Company. FLEX Choices differ from typical listed contracts as a result of traders can customise sure key phrases which might be usually standardized.
At press time, BTC traded at $62,719.
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