Key facts
- BlackRock has launched the iShares Bitcoin Premium Income ETF (BITA).
- The ETF combines spot bitcoin holdings with shares of BlackRock's IBIT ETF.
- BITA generates income by selling call options on approximately 25% to 35% of its IBIT holdings.
- Option premiums collected are distributed to investors monthly.
- The fund has a 0.65% sponsorship fee.
- BITA's options qualify for favorable 60/40 tax treatment.
BlackRock has launched the iShares Bitcoin Premium Income ETF (BITA), a new exchange-traded product designed to offer investors both exposure to bitcoin and a monthly income stream. The ETF holds spot bitcoin and shares of BlackRock's existing iShares Bitcoin Trust ETF (IBIT), while selling call options on a portion of these holdings. The premiums collected from these option sales are distributed to investors monthly, a strategy that BlackRock states is in response to client demand for income generation alongside bitcoin exposure. This covered call strategy aims to boost returns in sideways or mildly bullish markets, though it may cap upside participation in strong bull markets. BITA gains its bitcoin exposure through direct holdings and IBIT, which has accumulated nearly $49 billion in assets since its launch. The fund's 0.65% sponsorship fee is positioned competitively against other income-generating bitcoin ETFs. BlackRock executive Rick Rieder expressed optimism about bitcoin's future price trajectory. The ETF's structure utilizes Section 1256 contracts for options, offering favorable 60/40 tax treatment on capital gains from option premiums. It is registered under the Securities Act of 1933, operating outside the traditional Investment Company Act of 1940 framework. BlackRock's U.S. head of equity ETFs, Jay Jacobs, indicated the fund targets investors seeking returns beyond traditional assets, bitcoin holders desiring cash flow, and those who have been hesitant to invest in bitcoin due to its lack of income generation. BITA enters a growing market for covered call bitcoin products, with Goldman Sachs also filing for a similar ETF.