Key Takeaways
- • BlackRock filed a registration statement with the SEC on Oct. 19 for the iShares Bitcoin Managed Protection ETF (ticker PBIT), a bitcoin-linked fund designed to limit investor losses.
- • PBIT would not hold bitcoin directly; it would use three overlapping tranches of FLEX options and fixed-income securities, with purchased calls struck about 10% below the reference asset's starting value.
- • The structure initially limits losses to roughly 10% per tranche before expenses, but the filing explicitly states this is not a guaranteed maximum loss, and shareholders could still lose some or all of their investment.
- • The trade-off is capped upside: sold calls generate premium income but restrict gains during bitcoin rallies, so PBIT could underperform bitcoin in rising markets.
- • The filing proposes effectiveness 75 days after Oct. 19, with the management fee still unspecified; the reference asset is IBIT, which held about $65.34 billion in net assets as of Oct. 16.
Summary
BlackRock, the world's largest asset manager, submitted a registration statement with the U.S. Securities and Exchange Commission on Oct. 19 for the iShares Bitcoin Managed Protection ETF, which would trade under the ticker PBIT, according to Cryptonews.net. The proposed fund would seek returns linked to the iShares Bitcoin Trust ETF (IBIT) or similar bitcoin-linked assets while seeking a level of downside protection. Unlike traditional spot bitcoin ETFs, PBIT would not directly hold bitcoin or bitcoin exchange-traded products, instead relying on options contracts and fixed-income securities.
The fund would generally use three overlapping sets of options contracts, known as tranches, starting in different months. Each tranche would pair purchased call options with sold calls that cap gains above a specified strike price. Purchased calls would generally carry strike prices about 10% below the reference asset's starting value, which would initially limit losses to approximately 10% of that value per tranche, before expenses. The filing states this would not guarantee a 10% maximum loss, as thresholds could change and losses measured from a higher market value could exceed the initial limit. The fund expects to use Flexible Exchange Options (FLEX Options), exchange-traded contracts with customizable terms, and may adjust positions as market conditions change. The portfolio would also hold cash, money market funds, short-term government obligations and investment-grade fixed-income securities, with interest income potentially helping to cover options costs.
Selling call options would generate premium payments to help finance the protective strategy but would restrict returns during bitcoin rallies, meaning PBIT could underperform bitcoin in rising markets. Volatility and trading expenses could also weaken the downside protection. Blackrock Fund Advisors would manage the ETF. The filing flags risks including options liquidity, interest rates and counterparty exposure. Under its 80% investment policy, the fund would normally allocate at least 80% of net assets, plus investment borrowings, to bitcoin exposure or the protection strategy. The management fee has not been specified.
The proposal is a post-effective amendment to an existing iShares Trust registration statement and would become effective 75 days after Oct. 19, with the preliminary prospectus prohibiting sales until then. The product follows earlier BlackRock bitcoin income filings: a January 23 filing outlined a fund holding bitcoin and IBIT shares while selling call options for income, and the income-focused iShares Bitcoin Premium Income ETF (BITA) launched June 16 after a June Form 8-A filing. While BITA emphasizes income generation, PBIT would focus on downside protection. IBIT itself, which does not use the managed protection strategy, held approximately $65.34 billion in net assets as of Oct. 16, according to BlackRock's published figures.
The fund would generally use three overlapping sets of options contracts, known as tranches, starting in different months. Each tranche would pair purchased call options with sold calls that cap gains above a specified strike price. Purchased calls would generally carry strike prices about 10% below the reference asset's starting value, which would initially limit losses to approximately 10% of that value per tranche, before expenses. The filing states this would not guarantee a 10% maximum loss, as thresholds could change and losses measured from a higher market value could exceed the initial limit. The fund expects to use Flexible Exchange Options (FLEX Options), exchange-traded contracts with customizable terms, and may adjust positions as market conditions change. The portfolio would also hold cash, money market funds, short-term government obligations and investment-grade fixed-income securities, with interest income potentially helping to cover options costs.
Selling call options would generate premium payments to help finance the protective strategy but would restrict returns during bitcoin rallies, meaning PBIT could underperform bitcoin in rising markets. Volatility and trading expenses could also weaken the downside protection. Blackrock Fund Advisors would manage the ETF. The filing flags risks including options liquidity, interest rates and counterparty exposure. Under its 80% investment policy, the fund would normally allocate at least 80% of net assets, plus investment borrowings, to bitcoin exposure or the protection strategy. The management fee has not been specified.
The proposal is a post-effective amendment to an existing iShares Trust registration statement and would become effective 75 days after Oct. 19, with the preliminary prospectus prohibiting sales until then. The product follows earlier BlackRock bitcoin income filings: a January 23 filing outlined a fund holding bitcoin and IBIT shares while selling call options for income, and the income-focused iShares Bitcoin Premium Income ETF (BITA) launched June 16 after a June Form 8-A filing. While BITA emphasizes income generation, PBIT would focus on downside protection. IBIT itself, which does not use the managed protection strategy, held approximately $65.34 billion in net assets as of Oct. 16, according to BlackRock's published figures.
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