BlackRock Launches Bitcoin Income Fund Utilizing Covered Call Strategy

Prefer us on Google Download App Download App

BlackRock today unveiled the iShares Bitcoin Premium Income ETF (Nasdaq: BITA), a novel exchange-traded product that holds physical bitcoin and shares of the iShares Bitcoin Trust ETF (IBIT) while simultaneously selling call options on a portion of these holdings to generate monthly revenue for investors.

The fund writes call options on approximately 25% to 35% of its IBIT holdings, collecting option premiums that are then disbursed to investors each month. 

This structure maintains the majority of the bitcoin exposure, allowing for participation in price appreciation while simultaneously creating an income stream — a combination that BlackRock indicates a growing segment of its clientele has been requesting.

“A significant portion of our client base is interested in bitcoin but is also highly focused on income generation,” stated Robert Mitchnick, Head of Digital Assets at BlackRock. “BITA was conceived in response to that demand, empowering investors to preserve most of their bitcoin upside potential while capturing possible income through a convenient exchange-traded format.”

A covered call strategy entails holding an asset and selling call options against a segment of that position to gather premium income. 

In stable or moderately rising markets, these premiums enhance returns. In robust bull markets, the potential for upside on the covered portion is limited because issuers are obligated to sell at the option’s predetermined price.

BITA obtains its bitcoin exposure through both direct spot BTC assets and IBIT — the leading bitcoin ETP globally, which has amassed nearly $49 billion in assets since its introduction in January 2024. IBIT’s options market witnesses an average daily trading volume of $3.7 billion and ranks among the top 1% of all options products by this metric, a scale BlackRock deems crucial for executing the strategy with institutional-grade quality.

The fund has a sponsorship fee of 0.65%, which is higher than IBIT’s 0.25%, but falls below the fees of other income-generating bitcoin ETFs such as Roundhill’s YBTC and NEOS’ BTCI.

Earlier today on Bloomberg, BlackRock executive Rick Rieder commented, “I believe bitcoin will ultimately surge significantly higher.”

Tax treatment distinguishes BITA

BITA’s framework maintains bitcoin and IBIT for tax-efficient asset appreciation while offering options on IBIT that qualify as Section 1256 contracts, benefiting from advantageous 60/40 tax treatment — 60% long-term and 40% short-term on capital gains derived from option premium income. 

Participants in the partnership structure also have the possibility to pass through capital losses to offset gains elsewhere in their investment portfolios, with both short-term and long-term gains retaining their capital gains status.

The fund was established under the Securities Act of 1933, not the Investment Company Act of 1940, signifying its operation outside the regulatory guidelines governing mutual funds and conventional ETFs.

Target Audience for BlackRock’s New Fund

Jay Jacobs, BlackRock’s U.S. head of equity ETFs, indicated that the fund is designed for three specific investor categories. The initial segment includes individuals prioritizing income, seeking returns beyond those offered by dividend stocks and bonds.

The second category comprises existing bitcoin holders who desire to generate cash flow from their long-term investments. The third group consists of investors who have avoided bitcoin — or gold — due to the lack of inherent income generation from these assets.

“One can envision this appealing to individuals who hold a substantial portion of their assets in bitcoin but wish to establish an income stream to support their living expenses,” Jacobs informed CoinDesk.

Jacobs further elaborated that while some IBIT investors might transition to BITA, the fund’s primary aim is to attract individuals who do not currently own bitcoin, particularly those for whom income is a fundamental requirement rather than an added benefit.

BITA enters a market where bitcoin products utilizing covered calls are gaining momentum. Goldman Sachs submitted a filing in April to introduce its own Bitcoin Premium Income ETF, a fund also employing a partial covered call strategy. Bloomberg analyst Eric Balchunas anticipates Goldman’s product will become effective around July 1.

BITA further solidifies BlackRock’s leading position in the digital asset ETP sector. The firm secured approximately 90% of all U.S.-listed digital asset ETP inflows in 2025 and currently manages over $130 billion in assets across digital asset ETPs, tokenized liquidity funds, and stablecoin reserve management operations.

Details can be found on the website : bitcoinmagazine.com