In 2025, new ETFs that offer both bitcoin exposure and options will be introduced.

• In 2024, tens of billions of dollars will be earned through the combined efforts of spot bitcoin ETFs.
• The Calamos fund offers a 12-month investment plan that includes options exposure on the Cboe Bitcoin U.S. ETF Index and Treasury holdings.
• Other ETF managers are also working on combining crypto exposure with popular fund styles, in addition to Calamos.

In 2024, Bitcoin ETFs were popular among investors, and now asset management firms are developing ways to combine cryptocurrencies and derivatives in exchange-traded packages.

This month, Calamos Asset Management will introduce a structured protection ETF that enables investors to profit from bitcoin's upward trend while maintaining 100% downside protection.

The CBOJ fund will have exposure to options on the Cboe Bitcoin U.S. ETF Index, Treasury holdings, and will be held for 12 months. The exact upside cap will be determined on Jan. 22 based on options pricing.

The fund is essentially introducing a popular equity ETF strategy to crypto investing. With the rise of defined outcome products, including buffer funds, in recent years, investors have been seeking new ways to diversify their portfolios. This trend was further boosted by the 2022 market sell-off, when both stocks and bonds declined.

Bitcoin ETFs experienced a successful launch in January, with funds amassing billions of dollars and contributing to the cryptocurrency's record-breaking price of over $100,000.

The total assets of the iShares Bitcoin Trust ETF (IBIT), the most popular fund, surpassed $50 billion due to the inflows and crypto rally.

Matt Kaufman, Head of ETFs at Calamos, stated that his team believes that financial advisors are still hesitant to invest in bitcoin due to its historical volatility, but structured funds may be able to convince them otherwise.

Kaufman stated that investors want to access that space in a risk-managed framework or something that makes more sense for their portfolio. He also believes that investors will hold the Calamos fund in conjunction with pure-play bitcoin ETFs.

Other ETF managers are also working on combining crypto exposure with popular fund styles, in addition to Calamos.

Two other ETF issuers, Innovator and First Trust, have filed to launch funds with strategies similar to Calamos. Additionally, firms are exploring the combination of bitcoin with income-generating strategies, such as covered call funds from Grayscale and Roundhill.

The likelihood of more funds being filed in 2025 is high, particularly with a Securities and Exchange Commission that is predicted to be more favorable to crypto under President-elect Donald Trump.

How it works

The Calamos fund is intended to be held for a 12-month period, with a holding period from Jan. 22, 2025, to Jan. 31, 2026. However, since the bitcoin exposure is constructed through options that fluctuate in price as their expiration date approaches, early investors may receive less than the anticipated gain from a bitcoin surge and could potentially incur a loss.

Calamos intends to introduce "floor" funds that provide 90% and 80% protection for bitcoin, allowing for some initial losses in exchange for greater potential returns.

Bitcoin products that work are likely to have a different structure than traditional buffer funds, which protect against the first stated percentage loss, due to the volatility in crypto, according to Kaufman.

Kaufman stated that while the S&P 500 returns follow a normal bell curve distribution, bitcoin returns exhibit a more extreme left tail risk or far right upside. As a result, building a buffer may not provide much protection against potential losses.

The growth of the options market is closely tied to the performance of funds. Options linked to bitcoin ETFs only became available late last year. Liquidity problems with options have negatively impacted the performance of leverage funds associated with MicroStrategy, which is often viewed as a reflection of bitcoin's performance.

Kaufman stated that there are no concerns about capacity in the options market for the Calamos funds.