YieldMax, a specialized exchange-traded fund (ETF) firm, has recently submitted an application to the United States Securities and Exchange Commission (SEC) to introduce a groundbreaking yield-bearing ETF product.
This innovative offering will be based on shares of MicroStrategy, the Bitcoin-focused holding company led by Michael Saylor.
If granted approval by the SEC, the ETF will be known as the “Option Income Strategy ETF,” with plans to launch in 2024, trading under the ticker symbol “MSTY,” which is just one letter different from MicroStrategy’s existing ticker “MSTR.”
YieldMax’s forthcoming ETF employs a unique “synthetic covered call” strategy. This strategy combines the purchase of call options and the sale of put options to generate revenue, with the earnings distributed to MSTY ETF holders on a monthly basis.
An interesting aspect of this ETF is that it will not possess any actual MicroStrategy shares; instead, it will exclusively derive income from trading MSTR derivatives.
To minimize potential losses, the fund limits its exposure to a 15% gain on call options each month.
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Importantly, the monthly yields from the ETF will not be directly linked to the performance of MicroStrategy shares, ensuring that investors can still receive yields even if MicroStrategy’s stock experiences significant declines.
Questions have arisen on social media platforms regarding the rationale behind investing in this ETF rather than directly purchasing MicroStrategy stock or its options.
Yield-bearing ETFs like this one tend to appeal to conservative investors seeking slightly higher-than-average returns from the volatile stock market.
The fund’s imposed gain limits make it a cautious yet potentially more profitable avenue for generating passive income from significant fluctuations in stock prices.
YieldMax already offers a range of 18 similar ETF products tied to major tech companies such as Tesla,
Apple, and Nvidia. In the case of MicroStrategy, its shareholders have enjoyed substantial gains in 2023, with the company’s shares appreciating by over 290% since the beginning of the year.
Furthermore, MicroStrategy made headlines when its co-founder, Michael Saylor, announced the acquisition of an additional 16,130 BTC for approximately $593.3 million on November 30th, at an average cost of $36,785 per Bitcoin.
As of November 29th, MicroStrategy held a substantial 174,530 BTC, valued at roughly $7.6 billion at the time of this report.
This underscores MicroStrategy’s commitment to its Bitcoin holdings and its prominent role in the cryptocurrency market.
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