For years, it was tough to generate income from bitcoin. Investors had to hope their positions in the largest cryptocurrency appreciated. Then they could sell at a profit, thus generating a form of “income.”
hanks to ETFs such as the NEOS Bitcoin High Income ETF (BTCI ), investors can reap significant income while maintaining some upside exposure. With a 30-day SEC yield of 2.83%, BTCI is delivering on the crypto income promise.
BTCI’s stablemate, the newly minted NEOS Boosted Bitcoin High Income ETF (XBCI), has the potential, indeed, to boost the income profile associated with the king of digital currencies. Like other NEOS income-generating ETFs, XBCI, which debuted in early February, offers some upside potential return. That’s an indication that investors embracing the rookie ETF can benefit from bitcoin appreciation. Meanwhile, they can harness potentially lucrative levels of income.
Examining XBCI Plumbing
XBCI delivers monthly distributions, confirming that it could be useful for cryptocurrency investors seeking a steady income stream. Prospective investors should still examine the new ETF’s inner workings. After all, this actively managed product is more than just a basic covered call fund.
XBCI “may seek to take advantage of tax loss harvesting opportunities by taking investment losses from the Spot Bitcoin ETPs and/or Bitcoin Futures ETF positions to offset realized taxable gains of the Spot Bitcoin ETPs and/or Bitcoin Futures ETFs,” observed NEOS.
XBCI holds a traditional spot bitcoin ETF with exposure to the strategy set out by the aforementioned BTCI. Ideally, that amplifies the BTCI proposition.
XBCI’s “exposure to the underlying strategies of BTCI, combined with the boost from the additional long exposure to Bitcoin and the additional income through a synthetic Bitcoin covered call strategy, is designed to create approximately 150% of notional portfolio exposure to BTCI,” added NEOS.
It’s notable that XBCI and the other NEOS boosted products — the NEOS S&P 500 High Income ETF (SPYI ) and the NEOS Nasdaq-100 High Income ETF (QQQI ) — are departures from traditional geared ETFs. These funds aren’t dependent on swaps and daily resets. Rather, standard index options provide XBCI with its “boost.” For investors, that methodology has potential cost benefits.
“A unique characteristic of these ETFs is that index options are used to create the ‘boosted’ notional exposure over longer outcome periods, rather than relying on swaps or traditional daily leveraged ETF structures, typically known for higher financing costs,” according to the issuer.
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