Bitcoin ETFs with Downside Protection: New Options Strategies Arrive in 2025
The success of Bitcoin ETFs in 2024 has paved the way for innovative financial products combining cryptocurrency exposure with traditional investment strategies. Asset management firms are now developing exchange-traded funds (ETFs) that incorporate options, offering investors a novel approach to navigating the crypto market.
Calamos Investments recently announced the launch of a structured protection ETF, designed to provide exposure to Bitcoin’s potential upside while offering 100% downside protection. This fund will utilize options on the Cboe Bitcoin U.S. ETF Index, combined with holdings in U.S. Treasury securities. The fund, trading under the ticker CBOJ, aims to provide a defined outcome over a 12-month holding period. The exact upside cap will be determined on January 22nd, based on prevailing options pricing.
This strategy mirrors the popular “defined outcome” approach seen in equity ETFs, which have gained traction among investors seeking diversified portfolios. The 2022 market downturn, which saw declines in both stock and bond markets, further fueled the demand for such products.
The launch of spot Bitcoin ETFs in January 2024 proved to be remarkably successful, attracting substantial inflows and contributing to Bitcoin's surge. The iShares Bitcoin Trust ETF (IBIT), a leading fund in this space, saw its assets under management surpass $50 billion.
Despite this success, Matt Kaufman, Head of ETFs at Calamos, notes that many financial advisors remain cautious about Bitcoin due to its inherent volatility. He believes that structured funds like CBOJ can address these concerns by offering a risk-managed approach to crypto investment. Kaufman suggests these funds could complement existing pure-play Bitcoin ETFs in investor portfolios.
Calamos is not alone in exploring this innovative approach. Other ETF issuers, including Innovator and First Trust, have filed for similar products. Additionally, firms like Grayscale and Roundhill are exploring combining Bitcoin with income-generating strategies, such as covered call funds. The expectation of a more crypto-friendly regulatory environment in 2025 could further accelerate the development of these products.
How the Calamos Fund Works
The Calamos fund is designed for a 12-month holding period, specifically from January 22, 2025, to January 31, 2026. Because the Bitcoin exposure is achieved through options, whose prices fluctuate as their expiration date approaches, investors who sell the fund before the end of the holding period may not realize the full potential gains from a Bitcoin rally and could even incur losses. This underscores the importance of adhering to the recommended holding period.
This new wave of Bitcoin ETFs represents a significant evolution in crypto investing, offering investors greater control over risk and return. By combining traditional financial instruments with cryptocurrency exposure, these products aim to bridge the gap between traditional finance and the digital asset world.