Nasdaq’s International Securities Exchange (ISE) has made a significant move by filing a proposal with the U.S. Securities and Exchange Commission (SEC) to increase the position limits on options for the iShares Bitcoin Trust (IBIT). If approved, the limit would rise from the current cap of 250,000 contracts to a staggering 1,000,000 contracts. This adjustment aims to place IBIT options on par with those of major equities and exchange-traded funds (ETFs) like Apple, NVIDIA, and the SPDR S&P 500 ETF.
The proposal outlines that the current limit is overly restrictive and hinders legitimate trading and hedging strategies. By increasing these limits, institutional traders and market makers would have the ability to establish larger positions, thereby enhancing market depth and liquidity for the IBIT product. “This will allow institutions to build more interesting structured products for IBIT, increasing the total possible amount of capital that can be allocated to the Bitcoin ETFs,” commented Lai Yuen, an investment analyst at Fisher8 Capital. He emphasized that the change would be beneficial for long-term flows into IBIT.
This is not the first time Nasdaq has sought to increase IBIT’s options limits; the repetition underlines the growing institutional demand for Bitcoin derivatives. According to Tim Sun, Senior Researcher at HashKey Group, there is a clear trend of larger players seeking greater Bitcoin allocations, reflecting an expanding interest in this asset class.
The filing also requests an exemption to eliminate position limits entirely for customized ‘FLEX’ options that are physically delivered. Such a move could align IBIT more closely with other major commodity-based ETFs and redirect trading activity away from less transparent over-the-counter markets.
Crucially, the proposal highlights IBIT’s impressive market capitalization of $86.2 billion and its average daily trading volume of 44.6 million shares, which bolster the rationale for increasing position limits. The ISE’s proposal is currently under review by the SEC, with a public comment period open until December 17, 2025.
Analysts have varied opinions regarding the immediate market impact of this proposed change. Derek Lim, head of research at a crypto market-making firm, noted that the scale of the adjustment might be “more modest than most headlines suggest.” With BlackRock managing over $71 billion in Bitcoin, the increased options limit could enable a capital allocation of roughly $5.3 billion to the Bitcoin ETFs, which he considers a standard practice for large funds.
While the modifications have yet to be enacted, they indicate a pivotal shift in Bitcoin trading from purely speculative activities to more strategic, allocation-driven approaches. Analysts assert that while there may be no immediate effect on Bitcoin’s short-term price, the changed dynamics will allow institutions to build their Bitcoin holdings in a “lower-risk and more controlled manner.”
Looking ahead, market observers like Lim predict that realized volatility could compress by 50 to 100 basis points over the next six to 18 months, potentially leading to marginally higher prices due to reduced risk premiums. Notably, a rally in Bitcoin from $70,000 to $110,000 earlier this year was accompanied by a decline in volatility, indicating a significant change in trading patterns.
In a related development, BlackRock continues to strengthen its Bitcoin exposure, as evidenced by a recent filing indicating that its Strategic Income Opportunities Portfolio increased its IBIT holdings by 14% in the third quarter, reaching $155.8 million. As of recent data, Bitcoin’s price reached $91,500, marking a 5% increase in just 24 hours. The ongoing movements in the cryptocurrency space suggest a transition toward treating Bitcoin as a macro asset, with institutional players increasingly influencing market dynamics.
