BlackRock launches new Bitcoin ETF that generates income using a covered call strategy

BlackRock has launched the iShares Bitcoin Premium Income ETF (BITA), an exchange-traded fund designed to provide investors with exposure to bitcoin while generating monthly option premium income.

BITA provides bitcoin exposure through direct spot BTC holdings and shares of BlackRock’s flagship iShares Bitcoin Trust ETF (IBIT). It also sells call options on roughly 25%-35% of its IBIT holdings to generate income, which is distributed to investors, according to an announcement on Tuesday.

"A significant segment of our client base is interested in bitcoin but is also highly focused on yield generation," BlackRock Head of Digital Assets Robert Mitchnick said. "BITA was built in response to that demand, enabling investors to retain the majority of their bitcoin upside exposure while capturing potential income through a convenient exchange-traded structure."

The launch builds on BlackRock's highly successful crypto operation, as the issuer of the largest spot BTC and ETH trusts, which have been some of the fastest-growing ETFs on record. BlackRock first filed to launch BITA, which will trade on Nasdaq, in January.

It is also part of a trend of bitcoin exchange-traded products that have launched using a covered call option strategy to generate income. While ETFs that track ETH or SOL can generate yield by staking their underlying holdings, the Bitcoin protocol does not offer a native way to generate returns.

Notably, Goldman Sachs, a relative newcomer to the crypto ETF space, filed in April to launch its Bitcoin Premium Income ETF, an actively managed fund that also uses a partial covered call. Bloomberg's Eric Balchunas previously predicted that Goldman Sachs' income-generating bitcoin fund would become effective around July 1.

A covered call is a strategy of holding an asset directly and selling call options against a portion of that exposure to collect premium income upfront. In sideways or mildly bullish markets, these premiums can enhance returns. However, during strong bull markets, investor upside is capped on the covered portion because issuers are required to sell at the call's strike price. In general, higher volatility also generates fatter premiums, though distributions are variable.

BlackRock’s announcement notes that IBIT’s daily trading volume ranks among the top 1% of all options products, with $3.7 billion in average daily trading volume.

According to BITA’s latest amended S-1, the fund will carry a 0.65% sponsorship fee, higher than IBIT's 0.25%, but lower than other income-generating bitcoin ETFs like Roundhill's YBTC and NEOS' BTCI. The BITA fund was registered under the Securities Act of 1933, meaning it gets “favorable blended tax treatment of 60% long-term and 40% short-term on any capital gains realized from option premium income,” the announcement notes.

"Delivering a strategy like BITA at scale requires deep ETF and options expertise, rigorous risk management, and institutional-grade infrastructure – capabilities that iShares delivers every day," Head of Americas for Global Product Solutions at BlackRock Jessica Tan said.