In a landmark step underlining how institutional interest in Bitcoin continues to intensify, the Nasdaq ISE has filed a proposal with the U.S. Securities and Exchange Commission (SEC) to raise the position and exercise limits for options tied to the iShares Bitcoin Trust (IBIT) from 250,000 contracts to 1,000,000 contracts, effectively the maximum threshold allowed under the exchange’s rulebook.
The filing, announced November 26, 2025, comes after a period of rapid growth in IBIT’s options trading volume and open interest, which reportedly now surpasses many traditional and crypto-native derivatives platforms. Nasdaq ISE argues that the existing 250,000-contract cap has become restrictive hindering market makers, institutional investors, and hedgers from executing large-scale trades or structured strategies involving the ETF.
Why the Change Matters for Institutions and the Bitcoin Market
If approved by the SEC, the raised limit would place IBIT options in the same liquidity tier as top-tier equity and commodity ETFs such as those tracking broad indexes or major global markets. Proponents believe this milestone acknowledges Bitcoin’s growing maturity as an institutional-grade asset and will encourage deeper liquidity, tighter spreads, and a more robust derivatives market.
Importantly, the proposal also requests the removal of limits on physically settled FLEX IBIT options. These types of options, favored by hedge funds and institutional investors, allow more flexibility in customizing expiration dates and strike prices often used for bespoke hedging and yield-generation strategies. Removing caps for these instruments could further attract large-scale capital into Bitcoin-linked structured finance.
Analysts argue that this change could broaden access to Bitcoin exposure for pension funds, endowments, and large institutional portfolios who may have previously avoided crypto due to limited liquidity or options market constraints. As one commentator put it, this could “unlock multi-billion-dollar allocations to Bitcoin via regulated ETF derivatives.”
What Changed So Far? From 25,000 to 1,000,000 Contracts
The proposed surge to 1,000,000 contracts follows two prior increases within the last year: IBIT options were first granted trading approval by the SEC in September 2024. The initial position limit was a modest 25,000 contracts a limitation that proved quickly too small. In mid-2025, Nasdaq had already raised the cap to 250,000 contracts, acknowledging rising demand.
With trading volume and open interest increasing steadily through 2025, many market participants have viewed the 250,000 limit as a temporary stopgap rather than a permanent ceiling. The new filing formalizes a pathway to much greater capacity, reflecting how Bitcoin ETFs have rapidly transitioned from niche products to mainstream institutional instruments.
Potential Impact on Bitcoin, Liquidity and Market Dynamics
If the SEC approves the proposed amendment, IBIT may see significantly enhanced liquidity, potentially reducing volatility around large institutional flows. The deeper options market could offer more effective hedging and enable advanced strategies such as covered-call writing, cash-secured puts, and structured income products making Bitcoin exposure more palatable to risk-averse institutions.
Moreover, the change may shift some derivatives volume away from less-regulated crypto exchanges toward regulated U.S. markets a step many observers see as essential for long-term institutional adoption and regulatory legitimacy of Bitcoin-based products.
However, increased volume does not eliminate risk. With higher limits, market moves triggered by large option expirations or concentrated positions could still impact IBIT’s price and by extension, the underlying Bitcoin market. Institutions and regulators will likely monitor carefully to ensure hedging and margin practices remain robust.
FAQs
1. What is the proposed new option limit for IBIT?
The filing requests raising the limit from 250,000 to 1,000,000 contracts, covering both position and exercise limits for options on IBIT.
2. Why is Nasdaq raising the limit now?
Due to surging demand from institutional investors and market makers, rising open interest and volume, and the expanding role of IBIT in Bitcoin derivatives markets.
3. What are FLEX options and why does the filing matter for them?
FLEX options are customizable options (expiry date, strike, settlement) used by large investors for tailored hedging. The filing seeks to remove limits on physically-settled FLEX IBIT options, enabling more flexible, large-scale strategies.
4. How might this affect Bitcoin and ETF holders?
Greater liquidity and derivative flexibility could reduce volatility, improve price discovery, and allow institutional money to flow more easily into Bitcoin via regulated products but higher derivatives volume can still amplify risk if not managed carefully.
5. Is this proposal already approved?
Not yet. Nasdaq ISE has filed the proposal with the SEC; it is now under review and subject to public comment before any change to limits becomes official.