BlackRock today launched the iShares Bitcoin Premium Income ETF (Nasdaq: BITA), a new exchange-traded product that holds bitcoin and shares of the iShares Bitcoin Trust ETF (IBIT) while selling call options on a portion of those shares to generate monthly income for investors.
The fund writes call options on approximately 25% to 35% of its IBIT holdings, collecting option premiums that are distributed to investors each month.
The structure maintains a large amount of exposure to bitcoin, allowing it to participate in price appreciation while generating an income stream – a combination that BlackRock says a growing portion of its client base has requested.
“A significant portion of our client base is interested in bitcoin but is also very focused on generating revenue,” said Robert Mitchnick, Head of Digital Assets at BlackRock. “BITA was created in response to that need, allowing investors to retain most of their bitcoin exposure while capturing potential income through a convenient exchange structure.”
A compound call strategy involves holding an asset and selling call options against a portion of that position to collect premium income.
In marginal or substandard markets, these premiums increase returns. In strong bull markets, the upside in the covered segment is closed because the issuers must sell at the option’s strike price.
BITA gains exposure to bitcoin through both direct positions held by BTC and IBIT – the world’s largest bitcoin ETP, which has accumulated approximately $49 billion in assets since its inception in January 2024. The IBIT options market averages $3.7 billion in daily trading volume and ranks among the top 1% of all options products by that ratio, a ratio BlackRock says is critical to implementing the strategy for institutional quality.
This fund has a fee of 0.65% – higher than IBIT’s 0.25%, but lower than other income-generating ETFs such as Roundhill’s YBTC and NEOS’ BTCI.
Earlier today on Bloomberg, BlackRock CEO Rick Rieder said, “I think bitcoin is finally going up a lot.”
The tax structure distinguishes BITA
The BITA structure holds bitcoin and IBIT for tax-efficient growth while selling options on IBIT qualify as Section 1256 contracts, subject to favorable tax treatment of 60/40 — 60% long-term and 40% short-term capital gains from premium income.
Investors in the partnership structure may also pass on capital losses to reduce gains elsewhere in their portfolios, and both short-term and long-term gains retain the character of capital gains.
The fund was registered under the Securities Act of 1933 instead of the Investment Company Act of 1940, meaning it operates outside the regulatory framework that governs mutual funds and traditional ETFs.
Who is BlackRock building this
Jay Jacobs, BlackRock’s US head of ETFs, said the fund targets three different investor profiles. The first group includes cash-oriented investors who seek returns beyond dividend stocks and bonds.
The second consists of bitcoin holders who want cash flow from a long-term position. The third is investors who have stayed away from bitcoin – or gold – because those assets do not generate money on their own.
“You can imagine that these would be people who have a large portion of their wealth in bitcoin but would like to have some income to support their lifestyle,” Jacobs said. CoinDesk.
Jacobs added that while some IBIT holders may migrate to BITA, the fund is designed to attract investors who don’t own bitcoin at all yet – people whose income is a necessity, not a bonus.
BITA is entering a market where integrated bitcoin products are benefiting. Goldman Sachs filed in April to launch its own Bitcoin Premium Income ETF, a fund that also uses a hybrid call strategy. Bloomberg analyst Eric Balchunas estimated that Goldman’s product will go live on July 1.
BITA also extends BlackRock’s dominant position in the digital asset ETP space. The company captured nearly 90% of all US-listed digital asset flows by 2025 and now oversees more than $130 billion in assets across digital asset ETPs, cheap liquidity funds, and stablecoin reserve management.
