Jai Hamid
Calamos Investments just filed paperwork with the U.S. Securities and Exchange Commission (SEC) to launch “structured-protection” exchange-traded funds (ETFs) that hedge up to 100% of Bitcoin’s downside risk using the options market.
These ETFs promise to give investors Bitcoin exposure while cushioning them from its infamous volatility. Three new strategies are on the table. One offers complete protection for six months, while the other two hedge 90% and 80% of losses over one year.
Earlier this year, Calamos also filed for a one-year ETF with 100% downside protection. None of the funds have fees or tickers yet, but if approved, they’ll give investors four options for mitigating Bitcoin risk. The catch? More protection means fewer returns. That’s the tradeoff, and it’s not sitting well with everyone in the crypto crowd.
How Calamos plans to balance Bitcoin risk
These ETFs are all about options—literally. They’ll use a mix of call and put options to create a safety net for investors. Think of it like putting Bitcoin in bubble wrap: you’re still holding it, but you won’t feel the full brunt of the market’s ups and downs.
Each strategy comes with a cap rate, which limits the maximum return investors can earn. So, if you opt for the 90% protection fund, your losses will max out at 10%, but you’ll also see less upside than in the 80% fund. The higher the hedge, the lower the reward.
For these funds to work as advertised, investors must hold them from day one of the outcome period to its end. After that, the protection resets, and the options roll over automatically. It’s a neat system, but the filings warn there’s no guarantee these funds will deliver the level of protection promised.
James Seyffart, an ETF analyst at Bloomberg Intelligence, says regulatory changes could make or break these ETFs. Current Bitcoin ETF position limits are capped at 25,000, far lower than the 200,000-250,000 allowed for other ETFs.
“The regulators are being extra cautious, but it can only go up from here,” Seyffart said. FLEX options, which are customizable calls and puts, will also need wider availability to support this kind of structure.
Bitcoin just 1% away from $100,000
Calamos isn’t launching these funds in a vacuum. Bitcoin is charging toward $100,000, trading at $99,026 at press time after first surging past $99,000 in the U.S. on Thursday. The crypto market has gained $1 trillion since President-elect Donald Trump’s election win on November 5.
Trump’s pro-crypto beliefs have injected new life into the market, with expectations of friendlier regulations driving investor interest. The SEC recently approved spot Bitcoin ETFs to include derivatives, opening the door for these structured-protection funds.
Matt Hougan, Chief Investment Officer at Bitwise Asset Management, says the race to capitalize on Bitcoin’s momentum is heating up. “Every ETF entrepreneur with a pulse is looking at the Bitcoin space,” he said. “Crypto is no longer fringe—it’s becoming mainstream.”
Calamos already manages $400 million across 11 structured-protection ETFs, using similar options-based strategies for equities. The firm has $40 billion in total assets under management. These Bitcoin funds are an expansion of their playbook into the crypto space, which has never seen anything quite like this before.
Skeptics push back on capped returns
But not everyone is buying into the hype. Bryan Armour, Morningstar’s director of passive strategies research, thinks these funds miss the point of Bitcoin. “If you want Bitcoin without volatility, then you don’t want Bitcoin,” he said.
Armour argues that capping returns dilutes the appeal of the world’s most volatile (and rewarding) asset. He’s not alone. Hardcore crypto enthusiasts might find the idea of limiting Bitcoin’s upside a bit sacrilegious.
Still though, there’s no denying the appetite for more sophisticated crypto investment tools. The 2x Bitcoin Strategy ETF (BITX), launched last year, has pulled in over $3 billion in assets. The NEOS Bitcoin High Income ETF (BTCI), which debuted last month, already holds $13 million.
The ProShares Bitcoin ETF (BITO), one of the first to track Bitcoin futures, manages nearly $3 billion. Clearly, there’s room for Calamos to carve out its niche.
Meanwhile, SEC Chair Gary Gensler, who made life difficult for the industry with aggressive enforcement actions, will step down on January 20. Trump’s team is already discussing creating a White House Crypto Czar role, confirming the pro-crypto administration he had advertised.
This is energizing Wall Street. Charles Schwab’s incoming CEO Rick Wurster announced plans to offer spot crypto trading once regulations allow. MicroStrategy, a top Bitcoin whale, is ramping up its token purchases.
For Calamos, the challenge will be convincing investors that their capped-return model is worth the tradeoff. Whether these funds succeed will depend on how regulators respond and whether investors embrace the idea of “Bitcoin-lite.”
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