- BlackRock‘s IBIT ETF saw its options trading volume surge to a record 2.33 million contracts, with $900 million in premiums paid, during Thursday’s market crash.
- A viral theory proposed by analyst Parker suggests the activity stemmed from a major hedge fund being liquidated after its leveraged bets on cheap call options backfired.
- Options expert Tony Stewart challenged this view, arguing the record premiums largely reflected routine, panicked market activity as traders scrambled to close risky positions.
On Thursday, BlackRock’s flagship spot Bitcoin ETF (IBIT) plunged 13%, triggering an explosion in its derivatives market as traders scrambled for protection or profit. Consequently, a staggering 2.33 million options contracts changed hands, marking a historic volume record for the fund. The day also saw a record $900 million in premiums paid by options buyers, a sum equivalent to the market cap of several mid-tier cryptocurrencies.
Puts narrowly outpaced calls, indicating heightened demand for downside protection during the sell-off. This frantic activity ignited intense debate over its root cause among market observers.
A post by market analyst Parker went viral, linking the chaos to a hedge fund blowup. He theorized a fund heavily invested in IBIT used borrowed money to buy cheap “out of the money” call options. However, crashing prices triggered margin calls, forcing the fund to dump shares and scramble to replace expiring options.
Shreyas Chari from Monarq Asset Management noted, “Systematic selling… probably tied to margin calls especially in the ETF with the highest crypto exposure IBIT.” He added that rumors of a short options entity liquidating exacerbated the downward move.
Conversely, options expert Tony Stewart argued on X that the data shows a more fragmented picture. He pointed out that $150 million of the premiums came from traders buying back puts to close painful, loss-making positions. Meanwhile, the remaining premium volume involved numerous smaller, standard trades from a broadly panicked market.
“This [hedge fund blowup theory] is inconclusive from the Options standpoint. It also doesn’t seem enough tbh in size,” Stewart concluded. Ultimately, this episode confirms that IBIT options are now a significant market force worthy of close tracking.
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