PBIT Bitcoin ETF: BlackRock Files For A 10% Loss Floor

BlackRock wants a bitcoin fund that tries to cap the pain. On October 19 the firm filed paperwork for the iShares Bitcoin Managed Protection ETF, ticker PBIT. This PBIT bitcoin ETF would give up some gains in return for a floor under losses, according to its draft prospectus.

What BlackRock filed for the PBIT bitcoin ETF

The document is a Form 485APOS from iShares Trust, filed with the SEC on October 19. It is an early draft. The management fee, total expense ratio and listing date are all blank lines, and the prospectus carries a date reading only "2027."

The stated goal is upside exposure to the iShares Bitcoin Trust ETF (IBIT) or similar bitcoin exposure. That exposure runs up to an approximate limit and comes with a level of downside protection. The fund does not hold bitcoin directly. It builds the exposure through options, and the PBIT bitcoin ETF would sit on top of that structure.

The opening of the fund summary in the draft prospectus. Source: iShares Trust filing on SEC.gov.

How the PBIT options are layered

The fund would run three overlapping sets of options, which the filing calls tranches. Start dates are staggered by month across a quarter, so one tranche expires each month and a fresh one begins. Each tranche is a call spread: the fund buys in-the-money calls and sells out-of-the-money calls against them.

The bought calls provide the protection. Their strike, called the Tranche Protection Start Value, is typically set near 90% of the reference asset's price on the day of purchase. That leaves an initial maximum loss of roughly 10%, which the filing calls the Floor. The sold calls bring in premium to cover part of the cost. Their strike sets a cap on how much of a rally the fund can capture.

The catch behind the PBIT 10% floor

BlackRock is careful about what the floor means. The filing says the Floor is measured at the start of each tranche. If bitcoin rises after that, the loss measured from the new, higher price can be bigger than 10%.

Fees come off the top too, and the fund has broad discretion to move the protection level up or down. Because tranches overlap, the document says buyers should not expect one fixed floor or cap. It also repeats that investors may lose some or all of their money.

The section defining the Floor and the cap. Source: iShares Trust filing on SEC.gov.

What the PBIT filing leaves open

Cash is meant to sit in fixed-income holdings, and the interest on it helps pay for the options. The filing says BlackRock Fund Advisors covers the fund's operating costs apart from the management fee, interest, taxes, trading costs, distribution fees and litigation costs.

Several answers are missing. The document gives no fee, no strike levels and no launch day. It also names no cap, because the cap depends on market conditions when each tranche starts. Until BlackRock files a later amendment with those blanks filled in, the PBIT bitcoin ETF is a design on paper. Investors cannot yet compare its cost with holding IBIT outright, which is the first question any buyer will ask.

This article summarizes a draft SEC filing and offers no investment advice.