- The Roundhill Bitcoin Covered Call Strategy ETF (YBTC) launched in January 2023 and uses options strategies on Bitcoin futures ETFs to generate high income for investors.
- YBTC does not invest directly in Bitcoin. It sells call options on Bitcoin futures ETFs to earn premium income, limiting upside participation but generating over 30% in distributions.
- YBTC invests mainly in Treasury bills and options on the ProShares Bitcoin Strategy ETF (BITO). The options provide income while limiting exposure to Bitcoin’s spot price fluctuations.
A new Bitcoin exchange-traded fund (ETF) launched in January 2023 is promising investors annual returns of over 30%. The ETF does not invest directly in Bitcoin but uses options strategies with Bitcoin futures ETFs to generate income.
What is the Roundhill Bitcoin Covered Call ETF?
The Roundhill Bitcoin Covered Call Strategy ETF (ticker: YBTC) started trading on January 18, 2023. On January 27, it announced its first distribution to investors of $1.33 per share. Based on that payout and the fund’s net asset value, it equates to a 33% annual distribution yield.
The fund seeks to generate income through selling covered call options on Bitcoin futures ETFs. A covered call is when an investor sells call options on a security they already own. This provides income from the options premiums.
How the Fund’s Strategy Works
According to the prospectus, YBTC plans to invest around 80% of assets into options contracts using shares of Bitcoin futures ETFs as the reference asset. It does not invest directly in Bitcoin.
The fund is actively managed. It held mostly US treasury bills as of January 30, along with some exposure to call and put options on the ProShares Bitcoin Strategy ETF (ticker: BITO).
By selling call options on Bitcoin futures ETFs, the fund earns premium income. If Bitcoin’s price rises, the calls limit upside participation but the fund still earns the premiums. If Bitcoin’s price falls, the puts provide downside protection.
The new YBTC ETF offers a way for investors to earn high yields from Bitcoin without direct exposure. The fund utilizes options strategies on Bitcoin futures ETFs to generate over 30% in distributions. However, the fund does not track Bitcoin’s spot price directly. It remains to be seen if these high yields will persist long-term.