NEOS Investments launched the newest fund in their options income ETF suite today, this time bringing the strategy to bitcoin. The NEOS Bitcoin High Income ETF (BTCI ) combines bitcoin investing with a covered call strategy that benefits from elevated volatility.
For investors with the risk appetite for bitcoin investing, BTCI offers the potential to enhance that exposure with high income. The fund brings NEOS’s signature options-investing strategy to cryptocurrency. It’s the latest expansion by NEOS as it continues to expand into a wider array of asset classes.
“We always strive to be a solutions provider for income focused investors,” explained Troy Cates, co-founder and PM at NEOS. “Our goal is to offer exposures to well-known indexes and asset classes with data driven option strategies managed by the professionals at NEOs. We want to give investors more options to meet their income needs through accessible ETFs.”
Diversifying Your Income Portfolio With Bitcoin
BTCI is actively managed and seeks to generate monthly income through its covered call strategy while providing exposure to spot bitcoin through ETPs. The ETPs that the fund invests in hold Bitcoin and track its price performance before fees and expenses.
The fund also invests in bitcoin futures ETFs and options contracts that have bitcoin futures ETFs as their reference asset. This creates synthetic exposure to bitcoin through bitcoin futures while also writing covered call options on bitcoin futures ETFs to generate high monthly income. The managers use a rules-based, systematic, proprietary model to determine options positions.
Covered call options entail buying an asset while also writing a call on the underlying asset. This generates a premium but also caps the upside potential should the underlying asset appreciate. BTCI employs a synthetic covered call strategy, using options to gain synthetic exposure to underlying bitcoin futures ETFs.
The fund may also employ a bear call spread when bitcoin prices are expected to rise only marginally, remain flat, or decline. The spread seeks to generate a net credit for the fund. This happens when the premium earned from the call option sold is greater than what is paid to purchase a call option further out-of-the-money, or further from the strike price.
Options strategies like BTCI often benefit from volatility, earning higher premiums on call writing (and thereby income) when volatility spikes. Given bitcoin’s enhanced volatility, it could prove an attractive source of additional income for bitcoin investors.
The fund’s managers may also engage in tax-loss harvesting to capture losses in order to offset gains made.
BTCI has an expense ratio of 0.98%.
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