YieldMax Files for First ETF Tied to MicroStrategy Shares, Aims for 2024 Launch
Summary:
YieldMax, an exchange-traded fund (ETF) firm, has filed an application with the US SEC for the first yield-bearing ETF based on shares of Michael Saylor’s Bitcoin holding company, MicroStrategy. The fund, dubbed Option Income Strategy ETF, utilizes a synthetic covered call strategy to create income from trades in MSTR derivatives. The fund doesn't own physical MicroStrategy shares and limits potential growth to a 15% increase per month on call options, insulating it from significant shifts in MicroStrategy's stock price. The fund is expected to launch in 2024 and trade as MSTY.
YieldMax, a company that builds specialty exchange-traded funds (ETFs), has officially applied to create an unique ETF product that yields income based on MicroStrategy shares, a Bitcoin holding company managed by Michael Saylor. The application was submitted to the United States Securities and Exchange Commission (SEC) on December 7, and the fund, dubbed Option Income Strategy ETF, is planned for launch in 2024. Once sanctioned, the ETF is set to trade under the symbol "MSTY," resembling MicroStrategy's current ticker "MSTR" with a slight difference of one character.
This proposed ETF by YieldMax utilizes a sophisticated approach known as "synthetic covered call" strategy. It's a combination of activities that includes purchasing call options and selling put options for generating revenue. The earned income through these trades will be given out as monthly distributions to the MSTY ETF investors. It's significant to note that the fund will not own physical shares of MicroStrategy, instead, its income is purely derived from trading MSTR derivatives. To minimize chances of loss, the fund caps its potential growth to a 15% increase on the call options each month.
YieldMax affirmed that the regular yields of the ETF are not impacted by the fluctuation in MicroStrategy shares price. This indicates that the monthly income on the ETF would prevail even if MicroStrategy's stocks drop significantly. The strategy has prompted observers on social media to question its investment appeal versus directly purchasing company stocks or options.
It's noteworthy that yield-bearing ETFs appeal to prudent investors who aim for returns slightly above average on the most aggressive segments of the stock market. By limiting gains, fund managers present these as a safer option that can potentially offer more earnings from significant stock price movements. YieldMax currently offers 18 such ETF products that target other dominant tech firms like Tesla, Apple, and Nvidia.
This year, shareholders of MicroStrategy have seen significant profits, witnessing a 290% surge in the share prices since the beginning of the year, as per information on TradingView. On November 30, Michael Saylor announced MicroStrategy's purchase of an additional 16,130 BTC for a total of $593.3 million, averaging a price of $36,785 per Bitcoin. As of November 29, MicroStrategy's Bitcoin holding stood at 174,530 BTC, estimated at about $7.6 billion at the time.
Published At
12/8/2023 8:51:05 AM
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