A little-known Bitcoin ETF hit the U.S. market this month, promising investors impressive annual returns.
Round Hill Bitcoin Covered Call Strategy ETF (YBTC) was launched on January 18th. declared On Friday, it was announced that the first distribution to investors will be made today at $1.33 per share. Based on this and the fund’s current net asset value, this equates to an annual distribution yield of 33%.
This is a step above what even riskier, now-defunct crypto companies like Terraform Labs and Celsius once promised to customers for crypto deposits. It’s also much higher than what U.S. regulators, who have been reluctant to approve regular Bitcoin spot ETFs for years, have previously considered a safe yield in the crypto space.
“The Fund seeks to achieve its investment objectives through the use of a synthetic covered call strategy that provides current income on a monthly basis,” reads the prospectus summary on YBTC’s website.
A covered call is when an investor sells a call option on a security while holding an amount equal to that security in reserves. A call option gives the buyer the “choice” to buy an asset at a predetermined price at a future date, which some investors prefer to the risk of buying the asset itself.
Roundhill points out that Bitcoin has “historically offered a significant option premium,” creating a lot of high income potential. According to the prospectus, the fund plans to invest 80% of its net assets in option contracts that use shares of a Bitcoin futures ETF as the reference asset.
“The fund does not invest directly in Bitcoin,” it said, noting that it does not seek to track Bitcoin’s spot price. “Investors seeking direct exposure to Bitcoin prices should consider investing outside the fund.”
The fund’s website states that as of Monday, the majority of its assets were held in U.S. Treasuries, but there was some exposure to calls and puts in the ProShares Bitcoin Strategy ETF (BITO). .
YBTC is an actively managed fund. Fred Krueger, a Ph.D. He has a degree in Mathematics and is a former prop trader in Bitcoin. He prefers ETFs. This fund is the “answer” to earn his 30% on his BTC with “no risk of liquidation”.
“If the market goes down, the puts are exercised and you essentially own the bitcoin (at a loss),” he says. I have written on Twitter on Monday. “The market goes up, you get premium on puts, you get in on calls.”
YBTC was trading at $49.50 as of Monday, up 5% over the past five trading days.
Edited by Ryan Ozawa.