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First Bitcoin Yield ETF Filed: YieldMax Aims to Mirror MicroStrategy’s Holdings

Last Updated December 8, 2023 9:59 AM
Teuta Franjkovic
Last Updated December 8, 2023 9:59 AM

Key Takeaways

  • YieldMax has applied for SEC approval of the first yield-bearing ETF product based on shares from MicroStrategy.
  • The fund will not hold direct spot positions in MicroStrategy shares but will rely on trading MSTR derivatives.
  • Yield-bearing ETFs, like the one proposed by YieldMax, are commonly geared towards conservative investors.
  • MicroStrategy shareholders have witnessed substantial gains in 2023.

Expectations are growing as major asset managers anticipate the approval date for Bitcoin ETF applications, projected to be in 2024. The significance of this timeframe has generated excitement within the cryptocurrency community, considering the approval as a potential major milestone for the industry.

In light of these expectations, YieldMax, a dedicated exchange-traded fund (ETF) company, has submitted a filing  to introduce the initial yield-bearing ETF product linked to shares from MicroStrategy, Michael Saylor’s Bitcoin-holding company.

First Bitcoin Yield ETF, Aims to Mimic MicroStrategy’s Holdings

As per the filing  submitted to the United States Securities and Exchange Commission (SEC) on December 7, YieldMax has formally requested approval for the launch of its Option Income Strategy ETF, which will be anchored in MicroStrategy shares. The anticipated release date for this ETF is also set for sometime in 2024, the same as anticipated dates for other spot Bitcoin ETFs.

Pending approval from the SEC, the ETF will be traded under the ticker symbol “MSTY,” a mere single-letter deviation from MicroStrategy’s existing ticker “MSTR.”

Credit: SEC

Yieldmax’s impending ETF employs a “synthetic covered call ” strategy, combining the purchase of call options with the sale of put options to generate income. The resulting proceeds are then distributed to holders of the MSTY ETF in the form of monthly payouts.

Crucially, the ETF will not hold any direct spot positions in MicroStrategy shares, relying solely on the trading of MSTR derivatives to generate income. To mitigate potential losses, the fund restricts its exposure to an upside gain of 15% on the call options each month.

Yieldmax emphasizes that the monthly yields from the ETF are not contingent on the growth of MicroStrategy shares, ensuring that investors would continue to receive yields even in the event of a substantial decline in MicroStrategy stock value.

Some individuals on social media, particularly on X (formerly Twitter), questioned the rationale  behind choosing to invest in such an ETF rather than directly purchasing the company’s stock or its options.

Eyeing Conservative Investors with Tech-Focused ETFs

Yield-bearing ETFs  are commonly targeted at conservative investors seeking slightly higher-than-average returns from the most volatile segments of the stock market. Due to the imposed gain limits by fund managers, these ETFs are perceived as a prudent yet potentially more lucrative avenue for generating passive income amidst significant fluctuations in stock prices.

YieldMax extends its offerings with a portfolio of 18 comparable ETF products for other prominent tech companies, encompassing entities such as Tesla, Apple, and Nvidia.

MicroStrategy shareholders have experienced significant gains in 2023, as the company’s shares have surged by over 290% since January 1, according to TradingView data.

MSTR chart
Credit: TradingView

On November 30, MicroStrategy co-founder Michael Saylor revealed  that the company had acquired an additional 16,130 BTC at an average price of $36,785 per Bitcoin, totaling approximately $593.3 million.

As of November 29, MicroStrategy’s Bitcoin holdings amount to around 174,530 BTC, valued at approximately $7.6 billion based on the prevailing market conditions at the time of this publication.

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