Dallas-based investment firm Fortuna Funds has launched a new Bitcoin-focused ETF on the Chicago Board Options Exchange (CBOE), providing investors with exposure to Bitcoin while offering built-in downside protection.
The Fortuna Hedged Bitcoin Fund (HBTC) was launched on March 19 and is managed by Fortuna Funds co-founders Mark Adams and Joe Sando. The fund aims to replicate Bitcoin’s returns while mitigating the risk of significant losses.
The new ETF is meant to deliver exposure to Bitcoin-like returns, but with a twist. According to Fortuna, the product invests in “Bitcoin-related securities,” coupled with an “option strategy overlay to reduce downside exposure while retaining most of the upside potential.”
How it Works
Options are financial contracts that give the holder the right—but not the obligation—to buy or sell an asset at a set price by a certain date. HBTC uses both put and call options to shape its strategy.
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Put Options for Protection: HBTC buys put options below Bitcoin’s current price. If Bitcoin drops below that level, the fund can sell at the higher, pre-set price, thereby reducing losses.
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Call Spreads for Income: To help pay for those puts, the fund also sells a call spread (a type of options strategy) at a price above Bitcoin’s current value. This generates income that offsets the cost of the protection.
Buying put options isn’t free. The fund must pay a premium, regardless of whether the options are exercised. But by selling calls, HBTC collects income that helps offset those costs.
Early Results
In a recent press release, Adams said the fund is “performing well,” and its risk-mitigation strategy is already “proving effective.”
HBTC is one of the first products of its kind—combining traditional ETF mechanics with complex options strategies to smooth out Bitcoin’s notorious volatility.