BlackRock launches Bitcoin income ETF using covered calls

BlackRock launched the iShares Bitcoin Premium Income ETF (BITA) to trade on Nasdaq after filing in January. The ETF holds spot bitcoin and shares of the iShares Bitcoin Trust (IBIT) and sells covered call options on roughly 25-35% of its IBIT position, distributing the collected premiums to investors each month.

A covered call strategy involves holding an asset and selling call options on part of that holding to collect premium income up front. Premiums can reduce losses or add to returns when markets are flat or rise modestly; they limit gains on the covered portion if bitcoin rallies above the option strike. Option premiums and monthly distributions will vary with market volatility.

The fund's amended S-1 lists a 0.65% sponsorship fee. IBIT carries a 0.25% fee. BlackRock noted that IBIT's options market is active, reporting average daily volume near $3.7 billion and ranking among the top 1% of options products.

BITA was registered under the Securities Act of 1933. The filing states that capital gains from option premium income receive a blended tax treatment: 60% treated as long-term and 40% as short-term. The filing says the structure supports regular option-writing and monthly distributions.

Other asset managers have filed or launched ETFs that use partial covered-call strategies to generate income. Goldman Sachs filed in April to offer a similar Bitcoin Premium Income ETF that would write covered calls on a portion of its bitcoin holdings.

Unlike some other cryptocurrencies, bitcoin does not offer native staking to generate yield. Option-writing is one method managers use to add return to spot bitcoin exposure. Investors should note that option premium distributions are variable and that covered calls trade some upside potential for current income.

Robert Mitchnick, head of digital assets at BlackRock, described the fund as responding to client demand for bitcoin exposure with yield. Jessica Tan, head of Americas for global product solutions, highlighted the operational, options and risk-management capabilities the firm applies to run the strategy.