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Bitcoin ETFs have become a hit with investors in 2024, and now asset management firms are starting to develop ways to combine crypto and derivatives in exchange-traded packages.
The new products are scheduled to be released this month. Asset manager Calamos announced on Monday that it will launch a structured hedge ETF which aims to give investors the opportunity to capture some of the upside of Bitcoin with 100% downside protection.
The fund will combine options exposure to the Cboe Bitcoin US ETF Index with Treasury holdings and is designed to hold for 12 months. The exact upside limit will be determined on January 22 based on option pricing. It will trade under the ticker CBOJ.
Essentially, the fund brings the popular equity ETF strategy to crypto investing. Defined deliverables include buffer fundshave boomed in recent years as investors look for new ways to diversify their portfolios. Their popularity appears to have been boosted by the market sell-off in 2022, when stocks and bonds fell.
Bitcoin Spot Funds were launched in January 2024 and appear to be the debut in ETF history. These funds have collectively raised tens of billions of dollars and helped propel Bitcoin to a a record high of $100,000.
Bitcoin has soared since ETFs tracking the cryptocurrency were approved last January.
The inflow and rally of crypto got a boost iShares Bitcoin Trust ETF (IBIT)the most popular of the funds, with total assets exceeding $50 billion.
However, Matt Kaufman, head of ETFs at Calamos, said his team believes financial advisers are still largely avoiding bitcoin because of its history of volatility, and that these structured funds could win them over.
“People who want to access this space want to do it in a risk-managed framework or something that makes more sense for their portfolio,” Kaufman said. He also believes that investors will hold the Calamos fund in combination with bitcoin ETFs for a pure play.
Calamos isn’t the only ETF manager working on ways to combine crypto exposure with other popular fund types.
The innovator and The first trust two other ETF issuers have applied to launch funds with strategies similar to those of Calamos. Firms are also trying to combine bitcoin with income-generating strategies, including hedge fund offerings from issuers such as Shades of gray and Round hill.
More funds are likely to be filed throughout 2025, especially at the Securities and Exchange Commission, which is expected to be more crypto-friendly under the president-elect Donald Trump.
How it works
The Calamos fund is designed for a 12-month period. The stated retention period is from January 22, 2025. until January 31, 2026. Because exposure to Bitcoin is built through options that change in price as they approach their expiration date, it is possible that investors who sell the fund early will receive less than expected gains from the Bitcoin rally, and may even suffer a loss.
Calamos Bitcoin Structured Alt Protection ETF – January
| Ticker | The term of retention | The downside of Target’s defense | Annual fee |
|---|---|---|---|
| CBOJ | 22.01.2025-31.01.2026 | 100% | 0.69% |
Source: Reed
Calamos also plans to launch “minimum” funds that offer 90% and 80% protection for bitcoins, allowing for some initial losses in exchange for more growth.
Kaufman said the structure of the bitcoin products that work will likely look different than traditional buffer funds, which protect against the loss of the first declared interest due to the crypto’s volatility.
“If you look at the returns on the S&P 500, it looks like a normal bell curve distribution. If you look at the Bitcoin return distribution, it looks more like a smile. All of these are left tail risk or extreme right side growth. So if you’ve built a buffer, you’re really not protecting against a lot,” Kaufman said.
Another thing to keep an eye on is how the options market grows with the funds. Options related to Bitcoin ETFs did not begin to circulate until late 2024. Options liquidity problems have weighed on performance raised funds related to MicroStrategywhich is often seen as a proxy for Bitcoin.
“We don’t have any issues with capacity,” Kaufman said of the options market for Calamos funds.
