Hedgeye has filed for a “Hedged Bitcoin” ETF that might 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 package deal BTC publicity in a extra defensive wrapper.
“WOAH — NEW: Hedgeye ‘Hedged Bitcoin’ ETF was simply filed,” Seyffart wrote. He added that, in line with the submitting, the product would “maintain spot Bitcoin ETFs and use choices methods to scale back vol and draw back threat.”
The proposed fund is known as the Hedgeye Hedged Bitcoin ETF and would commerce beneath the ticker HBIT on NYSE Arca, Inc., in line with the prospectus excerpt shared by Seyffart. The doc stays preliminary, stating that the knowledge “isn’t full and could also be modified,” and that the securities will not be bought till the registration assertion filed with the Securities and Trade Fee turns into efficient.
Bitcoin Publicity With A Threat Overlay
The core construction is simple: the fund seeks Bitcoin publicity by way of ETPs and ETFs, whereas utilizing choices to dampen volatility and restrict draw back. The prospectus says the fund goals “to scale back volatility and handle draw back threat by way of an choices technique that entails the acquisition and/or sale of put and name choices” primarily based on Hedgeye Threat Administration, LLC’s proprietary indicators.
These indicators are described as “Threat Vary” indicators, which the submitting says are used to develop market entry and exit factors for investable property. In apply, 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 tendencies, liquidity, and different elements decided by the adviser.
“The Fund will make the most of choices on shares of Reference ETPs and/or on indexes or ETPs and ETFs that present publicity to Bitcoin worth actions,” the submitting states. “The Fund’s choices technique is designed to scale back volatility and handle draw back threat whereas sustaining publicity to the efficiency of Bitcoin by way of 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 isn’t merely entry to BTC, which is already obtainable by way of 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 specific that the hedge comes with a value. The fund’s possibility positions are “designed to offer draw back safety,” however can also imply “incessantly foregoing some upside potential.” That’s the central trade-off within the technique: buyers might get a smoother trip in adversarial markets, however they could additionally hand over a part of Bitcoin’s upside throughout robust advances.
“The premiums acquired from writing choices are meant to offer earnings to offset the price of shopping for choices,” the submitting says. The fund might purchase and write each standardized exchange-traded choices and Versatile Trade Choices, or FLEX Choices, that are exchange-listed contracts with customizable phrases reminiscent of 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 buyers can customise sure key phrases which can be usually standardized.
At press time, BTC traded at $62,719.
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