Nasdaq pushes to super‑size Bitcoin options trading
Nasdaq’s options venue is trying to tear down the remaining guardrails around one of the hottest products in crypto finance: options on BlackRock’s iShares Bitcoin Trust ETF (IBIT).
According to a recent regulatory filing, Nasdaq’s International Securities Exchange (ISE) has asked regulators to lift the position limit on IBIT options from 250,000 contracts to a staggering 1 million. That would quadruple the current ceiling and follow an earlier, tenfold increase approved just this year, underscoring how quickly demand has outgrown the original constraints.
The exchange argues the move is a response to “real” market pressure rather than speculative enthusiasm alone. Institutional traders, hedge funds, and sophisticated market‑makers are piling into IBIT options to hedge spot Bitcoin exposure, run volatility strategies, and arbitrage between different venues. The current cap, Nasdaq ISE says, is increasingly out of step with the size of positions that larger players want — and, in some cases, need — to hold.
The numbers backing that claim are difficult to ignore. At its peak in October, IBIT options open interest reached around 50 billion dollars in notional value. For a product that did not even exist a short while ago, that kind of growth has been nothing short of explosive. It also helps explain why Nasdaq is pushing regulators to allow much larger concentrations of risk in a single options series.
IBIT dominates the Bitcoin ETF options niche
Within the narrower world of US‑listed Bitcoin ETF options, IBIT has already become an overwhelming outlier. Options tied to BlackRock’s fund account for roughly 98% of all Bitcoin ETF options trading, according to data cited by Bloomberg. In practical terms, this means that if you are trading options on a Bitcoin ETF in US markets, you are almost certainly trading IBIT.
This dominance is a double‑edged sword. On one side, it creates deep liquidity, tighter spreads, and robust two‑sided markets — all of which attract even more institutional interest. On the other, it concentrates risk and activity into a single product, turning IBIT into a systemic node for anyone using listed options to manage Bitcoin exposure.
Raising the position limit to 1 million contracts would amplify both forces. Large asset managers could run more ambitious option overlays. Volatility desks could scale up complex strategies instead of spreading them across multiple smaller vehicles. But the same scale raises questions about what happens if liquidity suddenly dries up or volatility spikes.
Deribit still owns the global crypto‑options crown
Even as IBIT options explode on regulated US exchanges, they are still a challenger to the long‑time heavyweight of the crypto‑options world: Deribit.
By late 2025, Deribit — the leading offshore crypto‑options exchange — saw its Bitcoin options open interest climb to a record of about 50.27 billion dollars in notional value, with roughly 453,820 active BTC contracts. That figure puts it broadly in the same league as IBIT’s peak open interest, but Deribit’s base is purely crypto‑native: contracts are margined and settled in crypto, not through a traditional securities wrapper.
Deribit’s growth has been relentless. In 2024, its total trading volume nearly doubled, surging 95% to more than 1.185 trillion dollars. Options alone accounted for around 743 billion dollars of that activity. Despite the rapid ascent of regulated alternatives like IBIT options, Deribit continues to command the bulk of global BTC options open interest and remains the primary venue for professional traders seeking the deepest crypto‑derivatives liquidity.
From a structural perspective, the two markets speak to different clienteles and regulatory preferences. Deribit caters to a global pool of traders comfortable with offshore rules, crypto collateral, and 24/7 markets. IBIT options sit inside the US securities ecosystem, cleared through traditional infrastructures and embedded in risk frameworks that big institutions already understand.
Two parallel universes of Bitcoin risk
The rise of IBIT options does not mean Deribit is being displaced. Instead, the market is splitting into two powerful but distinct universes.
On one side, you have the regulated, ETF‑based ecosystem. Risk is expressed through options on a fund that itself holds spot Bitcoin. Positions live in brokerage accounts, sit inside familiar margin systems, and can be integrated into multi‑asset portfolios with equities, bonds, and other ETFs.
On the other side, there is the crypto‑native derivatives stack — perpetual swaps, vanilla options, and structured products built directly on BTC. These instruments are flexible, often highly leveraged, and run around the clock, but they come with different counterparty, regulatory, and operational risks.
Nasdaq’s push to raise the IBIT options cap is a signal that the regulated universe is catching up in sheer scale. At the same time, Deribit’s new records show that offshore markets are not ceding ground. For traders with the ability and mandate to operate in both, the arbitrage and hedging opportunities between these two worlds are only getting richer.
Why Nasdaq is in a hurry
Nasdaq ISE’s urgency is not just about growth; it is about staying competitive in a race that is moving faster than many expected.
If position limits stay low relative to the demand from large traders, transactions can migrate to less constrained venues. That can mean moving from listed options to over‑the‑counter (OTC) derivatives where transparency is lower and pricing more opaque. It can also mean shifting activity to non‑US exchanges that can accommodate larger sizes in a single series.
By lifting the IBIT cap to 1 million contracts, Nasdaq is trying to anchor more of that flow onshore and on‑exchange. Higher limits make it easier for banks and market‑makers to warehouse risk, hedge client books, and run inventory without constantly brushing up against regulatory ceilings.
For BlackRock, too, a more expansive options market around IBIT can be a strategic advantage. A deep and flexible options ecosystem usually enhances the attractiveness of the underlying ETF, drawing in investors who want both directional exposure and sophisticated risk management tools.
The SEC’s balancing act
The US Securities and Exchange Commission (SEC) has not yet approved Nasdaq’s proposed increase. The regulator is now in a familiar position: weighing the benefits of deeper liquidity against the risks of greater concentration and leverage.
On one hand, raising the cap can improve market efficiency. Larger, hedged positions are often more stable than fragmented exposure scattered across less transparent instruments. Robust listed options markets can absorb shocks and provide outlets for risk transfer during episodes of extreme volatility.
On the other hand, bigger limits can encourage oversized bets and make the system more vulnerable if those bets go wrong at scale. When a single product commands 98% of a niche like Bitcoin ETF options, regulators naturally worry about what happens if something disrupts that product — whether that is a technical failure, a sudden loss of confidence, or legal and regulatory shocks affecting Bitcoin itself.
The SEC’s decision will therefore serve as a broader signal about how comfortable it is with institutional‑grade Bitcoin exposure continuing to ramp up inside the traditional financial system.
What a 1 million contract cap would actually change
For retail traders, a 1 million contract limit on IBIT options will likely be invisible. Most individuals never come close to these thresholds. The real impact will be felt among large funds, trading firms, and arbitrageurs.
With more room to maneuver, institutional players can:
– Run larger covered call or protective put strategies on spot Bitcoin, mediated through IBIT
– Structure more complex volatility trades, like straddles and strangles, without hitting hard limits
– Hedge cross‑venue positions between Deribit and US‑listed options more efficiently
– Support tighter bid‑ask spreads by carrying bigger inventories of options on their books
In turn, that depth can trickle down as better pricing and more stable markets for smaller participants. If executed well and properly supervised, higher caps can widen participation without necessarily increasing systemic fragility.
Risks of letting Bitcoin “go full throttle”
Still, letting Bitcoin options “run wild,” as critics might frame it, is not without risk.
Bitcoin remains one of the most volatile major assets on the planet. Combining that volatility with leverage — which is embedded in options — creates non‑linear exposure that can swing violently during market stress. Market‑makers can find themselves scrambling to hedge delta and gamma exposure if prices gap, and their forced hedging can amplify moves in the underlying asset.
The concentration of nearly all Bitcoin ETF options in IBIT magnifies this. If liquidity were to dry up in IBIT at the same time spot Bitcoin crashed or spiked, the feedback loop between options hedging and spot trading could become intense. Regulators and exchanges therefore need to ensure that margin models, circuit breakers, and surveillance systems are robust enough to handle extreme scenarios.
Another concern is that a larger on‑exchange options market can indirectly affect spot demand. When more institutional hedging and speculation revolve around an ETF that needs to hold physical Bitcoin, flows in and out of IBIT can create powerful buying and selling waves in the underlying market.
Institutionalization of Bitcoin risk
The surge in IBIT options and Nasdaq’s appetite for higher limits foreground a bigger story: Bitcoin risk is being steadily absorbed into institutional portfolios and traditional financial plumbing.
What once lived almost exclusively on offshore crypto exchanges and in unregulated products is now expressed through brokerage accounts, standardized contracts, and familiar regulatory regimes. Deribit’s record volumes show the crypto‑native side is alive and well, but the growth of products like IBIT options indicates that Bitcoin has become too big to ignore for mainstream finance.
For pension funds, insurance companies, and large asset managers, the ability to hold an ETF and trade standardized listed options is a prerequisite for serious allocation. They need hedging tools that comply with internal mandates, audited processes, and regulatory oversight. The IBIT options market, super‑charged by higher caps, is one of the clearest signs that those conditions are now being met.
What traders and investors should watch next
Several developments will determine what comes next for this market:
– The SEC’s final decision on Nasdaq’s 1 million contract proposal
– Whether other exchanges seek similar expansions for competing Bitcoin ETFs
– How spreads, volumes, and open interest in IBIT options evolve relative to Deribit’s BTC options
– The behavior of options markets during the next major Bitcoin volatility event
If the SEC signs off and activity continues to climb, the center of gravity for institutional Bitcoin risk may shift even more decisively into regulated structures, even as offshore platforms retain their lead in raw volume and flexibility.
For now, the message is clear: Bitcoin options are no longer a boutique corner of crypto. Between Deribit’s towering volumes and Nasdaq’s push to blow past old limits on IBIT, options have become one of the primary battlegrounds where the future of Bitcoin’s integration with global finance is being decided.