First Trust Applies for Bitcoin Buffer ETF with US SEC
Asset Management firm First Trust recently applied for a buffer Bitcoin ETF with the Securities and Exchange Commission. This ETF will assist investors in offsetting risks generated from a downward price movement.
A financial firm named First Trust has recently filed for a Bitcoin buffer ETF rather than spot ETF application. The firm filed for buffer ETF application using an N1-A form with the Securities and Exchange Commission.
The ETF has been named First Trust Bitcoin Buffer ETF. The official document of the fund indicates investment in positive price movement before fees and transaction costs in Grayscale Bitcoin Trust or other exchange traded products.
These ETFs track the performance of Bitcoin (BTC). However, the buffer ETF does not track the spot prices but invests in options to generate profits. It places a buffer or limit on the price appreciation of a given investment product for a predetermined period.
Features of Buffer Bitcoin ETF
James Seyffart, the ETF analyst from Bloomberg, recently posted on social media regarding First Trust Bitcoin Buffer ETF. He noted that these funds protect investors against a defined percentage of downside losses by assigning upside threshold.
He further stated that he is expecting to see more Bitcoin buffer ETFs employing miscellaneous strategies to offer Bitcoin exposure over the next few weeks. He noted that First Trust Bitcoin Buffer ETF is first filing with the SEC in the United States.
139 Listed Buffer ETFs in the US
Data projections from ETF.com indicate that there are a total of 139 buffer ETFs listed within United States markets. Buffer ETFs have listed various asset classes such as equity, fixed income, and commodities. During the last few years, buffer ETF filings have increased consistently.
Asset management firm, BlackRock, debuted first buffer ETF iShares in 2023. Since then, the firm has also added iShares Large Cao Moderate Buffer ETF (IVVM) and iShares Large Cap Deep Buffer ETF (IVVB). The subsequent funds have gained 5% and 2% in valuation since launch as per TradingView.
Trading Dynamics for Buffer ETFs
Buffer ETFs do not grant comprehensive protection against investors. Therefore, investors should be aware of the potential for losses when investing in a buffer ETF. These funds have some unique characteristics that are not present in conventional investment products. Therefore, they might not be suitable for all investors.
The aforementioned remarks are quoted from the First Fund filing application. Jay Jacobs, an ETF expert from BlackRock shed some light on the functionality of buffer ETFs. He noted that buffer funds do not offer guaranteed prevention against negative ETF outputs.
He further explained that buffer ETFs do not entail principal or non-principal security. Therefore, investors should employ preventive measures to prevent losses when investing in buffer ETFs.
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