YieldMax, a company specializing in exchange-traded funds (ETFs), has filed with the United States Securities and Exchange Commission (SEC) to launch a unique yield-bearing ETF product centered around MicroStrategy, the Bitcoin-holding company led by Michael Saylor.
This filing, dated December 7, proposes the introduction of the Option Income Strategy ETF, which is based on shares in MicroStrategy and is expected to be released in 2024. If the SEC approves it, this ETF will trade under the ticker “MSTY,” closely resembling MicroStrategy’s own ticker “MSTR.”
The ETF designed by YieldMax employs a “synthetic covered call” strategy. This approach combines buying call options and selling put options to generate income, which is then distributed as monthly payouts to MSTY ETF holders. Significantly, the ETF will not hold actual MicroStrategy shares but will exclusively derive income from trading MSTR derivatives. To mitigate potential losses, the fund caps its monthly upside exposure from the call options at a 15% gain.
YieldMax highlights that the monthly yields from the ETF are not directly tied to the performance of MicroStrategy’s stock. This means that investors can still receive yields from the ETF even if MicroStrategy’s share price significantly declines.
The concept of a yield-bearing ETF like this has sparked discussions on X (formerly Twitter), with some users questioning the rationale behind investing in such an ETF as opposed to directly purchasing the company’s stock or options. Yield-bearing ETFs generally appeal to conservative investors seeking modestly higher returns from the more volatile segments of the stock market. The gain limits set by the fund managers position these ETFs as a relatively safe yet potentially more lucrative means of earning passive income from substantial stock price fluctuations.
YieldMax already offers a range of 18 similar ETF products for other major tech companies, including Tesla, Apple, and Nvidia. MicroStrategy’s shareholders have experienced significant gains in 2023, with the company’s share price increasing by over 290% since January 1, according to TradingView data.
On November 30, Michael Saylor, co-founder of MicroStrategy, announced the acquisition of an additional 16,130 BTC at an average price of $36,785 per Bitcoin, costing approximately $593.3 million. As of November 29, MicroStrategy’s Bitcoin holdings amount to about 174,530 BTC, valued at roughly $7.6 billion at the time of reporting.
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