The landscape of ETFs (Exchange-Traded Funds) has expanded significantly in recent years. Typically ETFs hold lower fees and greater liquidity than mutual funds, creative sponsors now offer a plethora of strategies with some being rather sophisticated. Covered call ETFs that focus on specific stock sectors have emerged as a popular path to generate income while gaining exposure to sectors like tech.
Grayscale, a crypto-focused fund sponsor that was one of the first to offer a spot Bitcoin ETF, has recently listed a covered call ETF for Bitcoin (BTCC).
The strategy is to purchase shares in Bitcoin ETFs as the referenced asset, then write calls on these investments. The sold calls adjust on a rolling basis as the fund distributes dividends monthly as it seeks to “maximize income.” If the fund managers execute the strategy effectively, the fund will benefit from both the rising price of Bitcoin (if it increases) and the income from the calls. The current market price of BTCC is around $36, and the most recent distribution in May was $0.9449. The distribution is currently around 30.84%. Of course, this can, and will, change.
The expense ratio on the fund is reported at 0.66%.
It is interesting that presently most of the invested funds are held in US Treasuries (~70%).
While the fund was launched in April and remains relatively small, with $5.4 million in assets under management and just 150,000 shares. The trading volume is low too. Still, it is interesting to see Grayscale add another fund to its portfolio, which offers derivative income on a digital asset, which may appeal to investors interested in income along with crypto exposure.
This covered call Bitcoin ETF is just another example of the ongoing integration of digital assets into the world of alternative assets available to investors.
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