A specialized exchange-traded fund (ETF) firm called YieldMax has submitted an application to the United States Securities and Exchange Commission (SEC) to launch the first yield-bearing ETF product based on shares in MicroStrategy, the Bitcoin holding company of Michael Saylor. If approved, the ETF will trade under the ticker "MSTY" and is expected to be released in 2024.
Synthetic Covered Call Strategy
YieldMax's proposed ETF, named Option Income Strategy ETF, will utilize a "synthetic covered call" strategy. This strategy involves buying call options and selling put options to generate revenue, which will be distributed to holders of the ETF as monthly payouts. Notably, the ETF will not hold any spot holdings of MicroStrategy shares, instead generating income through trading MSTR derivatives. The fund limits its upside exposure to a 15% gain on the call options each month to minimize potential losses.
Yield-Bearing ETFs for Conservative Investors
Yield-bearing ETFs are typically targeted towards conservative investors who seek slightly above-average returns in volatile parts of the stock market. These ETFs are viewed as a cautious yet potentially more profitable way of generating passive income from significant fluctuations in stock prices. YieldMax already offers 18 similar ETF products for major tech companies such as Tesla, Apple, and Nvidia.
Investor Benefits and MicroStrategy's Growth
The monthly yields generated by the proposed ETF are not directly tied to the growth of MicroStrategy shares. This means that investors can still earn yields even if the company's stock experiences a significant decline. MicroStrategy shareholders have already witnessed substantial gains this year, with the company's shares increasing by over 290% since January 1st. Additionally, MicroStrategy recently acquired an additional 16,130 BTC, bringing its total holdings to approximately 174,530 BTC worth around $7.6 billion.
