Specialized exchange-traded fund (ETF) company YieldMax has filed an application to introduce the inaugural income-based ETF product derived from shares of MicroStrategy, the Bitcoin-holding firm led by Michael Saylor.
YieldMax has formally submitted a request to launch an options income strategy ETF tied to MicroStrategy stock, slated for a 2024 debut, as per a December 7 filing with the U.S. Securities and Exchange Commission (SEC).
Pending approval from the SEC, this ETF will be traded under the ticker "MSTY," with a strategy centering on a "synthetically covered call" approach. This involves the purchase of calls and the sale of puts to generate income, which will then be distributed to MSTY ETF holders as a monthly payout.
The ETF will not actually hold any physical MicroStrategy stock but will generate income solely through MSTR derivatives. To mitigate potential losses, the fund caps upside risk on call options to 15% per month.
YieldMax clarifies that the monthly returns generated by the ETF are not directly linked to the growth of MicroStrategy stock, ensuring investors receive the ETF's yield irrespective of any significant fluctuations in the company's stock value.
Some voices on X (formerly Twitter) have raised queries about why individuals would prefer investing in this ETF rather than directly acquiring shares of the company or its options. Income-based ETFs often attract conservative investors seeking slightly above-average returns during stock market volatility. These ETFs, managed with earnings limits, are viewed as a cautious but potentially more profitable avenue for generating passive income from substantial shifts in share prices.
YieldMax already offers 18 similar ETF products focused on other prominent tech entities like Tesla, Apple, and Nvidia. MicroStrategy shareholders have witnessed substantial gains in 2023, as the company's stock price has surged over 290% since January 1, according to TradingView. On November 30, MicroStrategy's co-founder, Michael Saylor, revealed the acquisition of an additional 16,130 BTC for around $593.3 million, at an average price of $36,785 per Bitcoin.
As of November 29, MicroStrategy held roughly 174,530 Bitcoins, amounting to approximately $7.6 billion based on current valuation.
