Bitcoin ETF Offering 30% Yield: How It Works

A little-known Bitcoin ETF hits the U.S. market this month, promising impressive annual returns for its investors.

Roundhill Bitcoin Covered Call Strategy ETF (YBTC) launches with first distribution to investors at $1.33 per share. Based on that data and the fund's current NAV, that equates to an annual distribution yield of 33%.

Roundhill Chief Strategy Officer Dave Mazza confirmed to Decrypt that YBTC’s distribution yield is currently 33.19%.

This is a step above what riskier, now-defunct cryptocurrency firms like Terraform Labs once promised customers for cryptocurrency deposits. It’s also far higher than the safe yields in the cryptocurrency space considered by U.S. regulators who have been reluctant to approve regular Bitcoin spot ETFs for years.

Mazza explained: “YBTC seeks to generate monthly income through a covered call strategy on Bitcoin, which Bitcoin has historically provided due to the asset’s high volatility. A substantial option premium."

A covered call option is when an investor sells a call option on a security while holding an equal amount of that security in its reserves. securities. A call option gives buyers the "option" to purchase an asset at a predetermined price at a future date, and some investors prefer to take the risk of purchasing the asset itself.

Roundhill noted that Bitcoin has "historically provided substantial option premiums," creating a lot of high-income potential. According to the prospectus, the fund plans to invest 80% of its net assets in options contracts using Bitcoin Futures ETF shares as the reference asset.

"The fund does not invest directly in Bitcoin," it noted, noting that it does not seek to track the spot price of Bitcoin. "Investors seeking direct exposure to the price of Bitcoin should consider investments outside of the fund."

The fund's website also explains that its assets are primarily in the form of U.S. Treasury bills Hold, partially own call and put options on the ProShares Bitcoin Strategy ETF (BITO).

YBTC is an actively managed fund. Said Fred Krueger, who holds a Ph.D. With a PhD in mathematics and a former proprietary trader, he has a soft spot for Bitcoin ETFs – the “answer” to earning 30% on BTC with “no liquidation risk.”

"If the market goes down and the put option is exercised, you effectively own Bitcoin (at a loss)," he tweeted on Monday. “As the market goes up, you can earn premium on puts and participate in calls.”