Grayscale Investments has swiftly filed an updated prospectus for its Bitcoin Covered Call ETF, following the Commodity Futures Trading Commission's recent approval of options for spot Bitcoin ETFs.

This ETF will utilize a strategy that involves writing and/or buying options contracts on Bitcoin exchange-traded products (ETPs) to generate income.

The SEC's approval for options trading on spot Bitcoin ETFs, announced in October 2024, opens the door for ETF issuers to implement new options strategies, creating fresh investment opportunities.

These Covered Call ETFs are tailored for income-oriented investors seeking returns that exceed those of traditional ETFs, although they may underperform during bullish market conditions.

Importantly, these ETFs will not directly hold Bitcoin or Ethereum; rather, they will utilize exchange-traded instruments and derivatives, which could lead to performance discrepancies compared to actual cryptocurrency prices.

Covered call ETFs generate income by selling call options on the underlying assets, offering steady premiums and some downside protection, but they also cap potential gains if the options are exercised.

Options contracts allow investors to buy or sell an asset at a predetermined price within a specific timeframe, serving as effective risk management tools.

ETF analyst Eric Balchunas emphasized the importance of the CFTC's decision, noting that it paves the way for more complex Bitcoin investment products.

On November 18, 2024, the Options Clearing Corporation announced its readiness to facilitate the clearance and risk management of spot Bitcoin ETFs, signaling a move towards their listing on US exchanges.

The original prospectus for the Bitcoin Covered Call ETF was filed with the SEC in January 2024, outlining a strategy that includes using the Grayscale Bitcoin Trust (GBTC) as collateral while selling call options for income.

In addition to the Bitcoin ETF, Grayscale is transitioning its Digital Large Cap Fund into an ETF and has launched several trusts for other digital assets, showcasing its commitment to expanding crypto investment opportunities.

Major exchanges, including Cboe, NYSE, and Nasdaq, have proposed listings for options on spot Bitcoin ETFs, with Nasdaq specifically targeting options for BlackRock’s iShares Bitcoin Trust (IBIT).