Grayscale launches Ethereum covered call ETF
New fund adds income-focused strategy for ETH exposure, distributing premiums bi-weekly to investors
Grayscale and Adobe modified by Blockworks
Grayscale Investments announced on Thursday the launch of the Ethereum Covered Call ETF (ETCO), a fund designed to generate income by writing call options on exchange-traded products (ETPs) tied to Ether.
The new ETF is actively managed and will distribute income to shareholders on a bi-weekly basis. Krista Lynch, senior vice president for ETF capital markets at Grayscale, said the product was created to add “an income component” for investors already holding Ethereum exposure.
ETCO’s stated objective is to prioritize current income while also aiming to capture some of Ether’s price movements. Rather than investing directly in ETH, the fund sells call options on vehicles such as the Grayscale Ethereum Trust (ETHE) and Grayscale Ethereum Mini Trust (ETH).
By writing options close to market prices, ETCO collects premiums that may help mitigate volatility during downturns but cap potential gains during rallies. The fund charges an expense ratio of roughly 0.66%, according to Bloomberg, and commits to maintaining at least 80% of assets in derivatives tied to Ethereum ETPs.
The strategy is intended to provide cash flow through premiums collected on these contracts, though it also limits upside during rallies. Grayscale noted that ETCO joins its broader suite of income-oriented funds, which includes the Bitcoin Covered Call ETF (BTCC) and the Grayscale Premium Income ETF (BPI).
According to Blockworks Research, Ethereum ETFs have drawn more than $23 billion in cumulative flows, led by BlackRock’s ETHA at roughly $13 billion. Grayscale’s ETHE ranks second with about $4.7 billion, followed by Fidelity’s FETH at $2.7 billion.
Ethereum ETF cumulative flows | Blockworks Research
ETCO enters a market where ETH-linked products already command significant demand, positioning the fund as a differentiated, income-focused alternative within the maturing ETF segment.
Grayscale, which has been registered with the US Securities and Exchange Commission as an investment adviser since 2022, emphasized that ETCO will not invest in digital assets directly but will rely on options contracts tied to ETPs. The fund is advised by Grayscale Advisors, LLC and distributed by Foreside Fund Services, LLC.
Updated at 4:20 p.m. ET to include information on the cumulative flows of Ethereum ETF products.
This article was generated with the assistance of AI and reviewed by editor Jeffrey Albus before publication.
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