Cboe has recently launched its first suite of BuyWrite indices on a spot bitcoin Exchange Traded Fund (ETF).

These indices are the first option-based indices in the market that track the performance of systematic covered call strategies on a spot bitcoin ETF. The underlying of the ATM and OTM indices is the Grayscale Bitcoin Trust ETF GBTC. They are part of Cboe’s efforts to bring traditional options-based income strategies to the digital asset market, offering market participants new avenues for accessing cryptocurrency exposure while managing risk.

The Cboe GBTC ATM BuyWrite Index (BXGBTCA) is designed to track the performance of a monthly covered call strategy with a synthetic long exposure to GBTC and a short at-the-money call option on GBTC. The Cboe GBTC 20% OTM BuyWrite Index (BXGBTCT) has a similar design with a short 20% OTM call option on GBTC.

BXGBTCA and BXGBTCT do not directly hold Bitcoin but instead track Grayscale Bitcoin Trust (GBTC), a Bitcoin ETF, through options contracts. By doing so, they provide investors with exposure to Bitcoin without needing to directly hold the cryptocurrency.

Bitcoin’s volatility has remained elevated since the launch of spot Bitcoin ETFs in January 2024. GBTC’s annualized volatility has exceeded 50% since November 21, 2024. Not surprisingly, there is growing interest in income-generating strategies that collect Bitcoin risk premium and mitigate volatility.

BXGBTCA and BXGBTCT aim to measure the performance of these income-based strategies that use GBTC call premiums to cushion against Bitcoin’s volatile price swings. However, they are designed for slightly different purposes.

BXGBTCA prioritizes income generation by systematically writing calls close to spot prices. The rich premium collected upfront could potentially reduce loss in the case of market downturns. The strategy tends to outperform when the market stays flat or rapidly declines, but underperform in a quick market rally.

Alternatively, BXGBTCT attempts to balance income and growth. It writes call options at much higher strike prices, allowing investors to benefit from the potential rise of the underlying. The call premium is less than that in BXGBTCA.