YieldMax preps ETF focused on MicroStrategy exposure

A proposed fund would use a “synthetic covered call strategy” to offer indirect exposure to the share price of the largest publicly traded holder of bitcoin

article-image

Michaelsaylor.com and Adobe modified by Blockworks

share

An ETF issuer is prepping a new way for investors to get exposure to the stock price of the largest publicly traded holder of bitcoin. 

MicroStrategy, founded by bitcoin proponent Michael Saylor, currently holds 174,530 bitcoins. The company most recently revealed buying 16,130 BTC between Nov. 1 and Nov. 29. 

Fund group YieldMax seeks to generate monthly income by selling and writing call options on single company stocks. The firm first proposed the YieldMax MSTR Option Income Strategy ETF (MSTY) earlier this year. It already has similar funds focused on Tesla, Coinbase, Amazon, Google and others.

“Because they are such volatile stocks, writing call options on TSLA and COIN generates a significant amount of yield for the ETFs,” said Sumit Roy, senior analyst for ETF.com. “The same would hold true for this new fund focused on MicroStrategy.”

Read more: Will MicroStrategy ever stop buying bitcoin?

The proposed actively managed ETF provides “indirect exposure” to MicroStrategy’s share price via a synthetic covered call strategy, according to a Thursday filing. MSTY would limit its potential gains, seeking to capture no more than 15% of MSTR’s share price appreciation in a given month.

It does not hold MicroStrategy shares directly.

The fund would use this strategy “regardless of whether there are periods of adverse market, economic, or other conditions,” the disclosure adds — and “will not take temporary defensive positions” at such times. It plans to launch in 2024.

YieldMax did not return a request for comment. 

Roy noted that investors of ETFs using covered call strategies trade upside price appreciation potential in the stock for guaranteed yield in the form of options premiums received. Such funds tend to outperform when the underlying stocks are flat or down, while they underperform when the share prices rise rapidly.

“Some might argue that covered call strategies don’t make sense in volatile single stocks like Tesla, Coinbase and MicroStrategy because the point of those single stocks is to potentially capture big upside in exchange for taking on big risk,” he told Blockworks. “By writing calls, you are giving up most of the upside potential while keeping most of the downside risk.”

The filing comes about a month before the US Securities and Exchange Commission is expected to rule on a spot bitcoin ETF proposed by Ark Invest and 21Shares by June 10. Industry watchers expect the regulator could also approve or deny a dozen or so other similar products at that time. 

StoneX research head Matthew Weller previously told Blockworks that a low-cost spot bitcoin ETF could cause demand for MicroStrategy stock — historically used by some as a proxy for bitcoin — to “dry up.”  

But MicroStrategy’s Saylor said during the company’s earnings call in November that the approval of spot bitcoin ETFs would be “a catalytic event” set to benefit various players in the space, including MicroStrategy.

Saylor argued at the time that, while certain types of investors would gravitate toward bitcoin ETFs, MicroStrategy stock offers a way to get bitcoin exposure with benefits such funds won’t offer.

MicroStrategy’s stock has risen roughly 25% in the last month, as of 3:30 pm ET Friday. Bitcoin’s (BTC) price is up nearly 24% over that span.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Top Icon.png

Research

Osmosis thrived in H2 2023 on the back of increased DeFi activity deriving from recently launched Cosmos-related projects and better market conditions. With new value accrual mechanisms for the native token, Osmosis is well-positioned to continue its strong performance in 2024.

/

article-image

Snowflake, a cloud-based data warehouse solution, has partnered with Dune to make curated blockchain data available to its clients

article-image

Crypto is fast and it’s only getting faster as bitcoin threatens to retest its own highs set more than two years ago

article-image

The settlement ends the legal battle over eth.link, a domain once owned by imprisoned developer Virgil Griffith

article-image

TBC President Lee Bratcher told Blockworks he’s “confident” about the Council’s case against the DOE

article-image

The Monday trading volumes total passes the previous high mark set on the fund’s first day of trading nearly seven weeks ago

article-image

The hearings are expected to last for a couple of days as the court hears arguments for and against the bankruptcy plan proposed by Genesis