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 danger. 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 simply filed,” Seyffart wrote. He added that, based on the submitting, the product would “maintain spot Bitcoin ETFs and use choices methods to scale back vol and draw back danger.”
The proposed fund is known as the Hedgeye Hedged Bitcoin ETF and would commerce beneath the ticker HBIT on NYSE Arca, Inc., based on the prospectus excerpt shared by Seyffart. The doc stays preliminary, stating that the knowledge “just isn’t full and could also be modified,” and that the securities might not be bought till the registration assertion filed with the Securities and Alternate Fee turns into efficient.
Bitcoin Publicity With A Danger 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 danger by way of an choices technique that includes the acquisition and/or sale of put and name choices” based mostly on Hedgeye Danger Administration, LLC’s proprietary alerts.
These alerts are described as “Danger Vary” alerts, which the submitting says are used to develop market entry and exit factors for investable belongings. In apply, the ETF wouldn’t merely purchase and maintain Bitcoin-linked merchandise. It could alter its choices positioning based mostly on market situations, implied volatility, Bitcoin value tendencies, liquidity, and different components 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 value actions,” the submitting states. “The Fund’s choices technique is designed to scale back volatility and handle draw back danger 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 just isn’t merely entry to BTC, which is already out there 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 supply draw back safety,” however may imply “incessantly foregoing some upside potential.” That’s the central trade-off within the technique: traders could 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 supply earnings to offset the price of shopping for choices,” 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 resembling strike value 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 can be usually standardized.
At press time, BTC traded at $62,719.
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