Hedgeye has filed for a Hedged Bitcoin ETF that combines exposure to spot Bitcoin ETFs with an options overlay designed to reduce volatility and manage downside risk. Bloomberg ETF analyst James Seyffart flagged the filing, describing it as a new attempt to package Bitcoin exposure in a more defensive structure. The proposed fund, named the Hedgeye Hedged Bitcoin ETF with ticker HBIT, would trade on NYSE Arca and use options strategies based on Hedgeye Risk Management's proprietary signals to adjust positioning according to market conditions. The filing aims to address Bitcoin's volatility by offering a rules-based overlay intended to make exposure more tolerable during drawdowns, though this approach may limit upside potential during strong advances. This product joins a growing category of crypto ETFs focused on altering Bitcoin's return profile rather than maximizing raw gains.
Hedgeye Files HBIT ETF With Options-Based Volatility Reduction Strategy
The fund seeks Bitcoin exposure through ETPs and ETFs while using options to dampen volatility and limit downside. According to the prospectus, the fund aims "to reduce volatility and manage downside risk through an options strategy that involves the purchase and/or sale of put and call options" based on Hedgeye Risk Management, LLC's proprietary signals.
Those signals are described as "Risk Range" signals, which the filing says are used to develop market entry and exit points for investable assets. The ETF would adjust its options positioning based on market conditions, implied volatility, Bitcoin price trends, liquidity, and other factors determined by the adviser.
"The Fund will utilize options on shares of Reference ETPs and/or on indexes or ETPs and ETFs that provide exposure to Bitcoin price movements," the filing states. "The Fund's options strategy is designed to reduce volatility and manage downside risk while maintaining exposure to the performance of Bitcoin through investments in ETPs and ETFs."
The document remains preliminary, stating that the information "is not complete and may be changed," and that the securities may not be sold until the registration statement filed with the Securities and Exchange Commission becomes effective.
HBIT Structure Trades Upside Potential for Downside Protection
The filing is explicit that the hedge comes with a cost. The fund's option positions are "designed to provide downside protection," but may also mean "frequently foregoing some upside potential." That is the central trade-off in the strategy: investors may get a smoother ride in adverse markets, but they may also give up part of Bitcoin's upside during strong advances.
"The premiums received from writing options are intended to provide income to offset the cost of buying options," the filing says. The fund may buy and write both standardized exchange-traded options and Flexible Exchange Options, or FLEX Options, which are exchange-listed contracts with customizable terms such as strike price and expiration date.
The prospectus also notes that both standardized exchange-traded options and FLEX Options are guaranteed for settlement by the Options Clearing Corporation. FLEX Options differ from typical listed contracts because investors can customize certain key terms that are normally standardized.
At press time, BTC traded at $62,719.
FAQ
What is the Hedgeye Hedged Bitcoin ETF?
The Hedgeye Hedged Bitcoin ETF (ticker HBIT) is a proposed fund that would hold spot Bitcoin ETFs and use options strategies to reduce volatility and manage downside risk. The fund uses proprietary "Risk Range" signals from Hedgeye Risk Management to adjust options positioning based on market conditions, implied volatility, Bitcoin price trends, and liquidity.
How does HBIT's options strategy affect returns?
According to the filing, the fund's option positions are designed to provide downside protection but may frequently forego some upside potential. The strategy trades part of Bitcoin's upside during strong advances for a smoother ride in adverse markets. Premiums received from writing options are intended to provide income to offset the cost of buying options.
