Crypto ETF Options Rules Ease as NYSE Removes Limits

• NYSE removes 25,000 cap on BTC, ETH ETF options after SEC fast-track approval.
• New rules tie limits to liquidity, allowing ETF options positions above 250,000,
• FLEX options approval expands customizable strategies across major crypto ETFs.

U.S. exchanges affiliated with the New York Stock Exchange have introduced rule changes that remove key restrictions on options trading tied to spot Bitcoin and Ether exchange-traded funds, shifting how these derivatives are managed.

The amendments, filed with the U.S. Securities and Exchange Commission, eliminate the long-standing 25,000-contract cap on position and exercise limits for these products. The SEC approved the changes without enforcing the standard 30-day waiting period, allowing the updates to take effect immediately.

New Rules Tie Limits to Liquidity

Under the updated rules, option limits will no longer be capped. Instead, each exchange will apply its general criteria, which take into account factors such as trading volume and shares outstanding. This approach allows higher thresholds for actively traded products, with limits exceeding 250,000 contracts for highly liquid ETFs.

The removed cap was introduced in November 2024, when options trading for crypto-related ETFs was still in its early stages. At the time, regulators and exchanges applied conservative measures to maintain market stability. 

However, as trading activity increased, market participants raised concerns that the fixed limit was restrictive compared to those in other asset classes.

FLEX Options Expand Trading Strategies

The new rules also allow trading in FLEX options linked to major crypto ETFs. These instruments let traders customize contract terms, including strike price and expiration date.

The update applies to options tied to major funds such as BlackRock’s IBIT, Fidelity’s FBTC, ARKB, and Grayscale products. Previously, FLEX options were restricted for these ETFs.

Allowing FLEX options expands derivatives strategies and provides more tools for institutional traders.

Industry Alignment and Nasdaq Proposal

With NYSE Arca and NYSE American implementing these changes, all major U.S. options exchanges have now completed similar steps to remove the 25,000-contract limitation. The SEC stated that the revisions do not introduce new regulatory concerns.

Separately, Nasdaq ISE has submitted a proposal to further increase position limits for options tied to BlackRock’s IBIT ETF, seeking a limit of up to 1 million contracts. However, that proposal remains under SEC review.