A specialized exchange-traded fund (ETF) firm called YieldMax has submitted a filing with the SEC to launch a yield-bearing ETF product based on shares in MicroStrategy. If approved, the ETF will trade under the ticker “MSTY” and utilize a “synthetic covered call” strategy to generate monthly payouts for investors.
Generating Income Through Derivatives
The ETF will not own any spot holdings of MicroStrategy shares but will generate income by trading MSTR derivatives. The fund limits its upside exposure to a 15% gain on the call options each month to mitigate potential losses. The monthly yields are not directly dependent on the growth of MicroStrategy shares, allowing investors to earn yields even if the company’s stocks take a hit.
Benefits of Yield-Bearing ETFs
Yield-bearing ETFs are popular among conservative investors looking for slightly above-average returns in volatile markets. These funds offer a cautious yet potentially profitable way to generate passive income from swings in stock prices. YieldMax already offers similar ETF products for other major tech companies like Tesla, Apple, and Nvidia.
MicroStrategy’s Growth and Bitcoin Holdings
In 2023, MicroStrategy shareholders saw significant gains, with the company’s shares growing over 290%. Additionally, MicroStrategy acquired an additional 16,130 BTC for $593.3 million at an average price of $36,785 per BTC. Currently, the company holds around 174,530 BTC worth approximately $7.6 billion.
Hot Take: A Unique Approach or Unnecessary Complexity?
Some critics have questioned why investors would choose to invest in YieldMax’s ETF instead of buying MicroStrategy stock or its options directly. The ETF’s strategy adds an extra layer of complexity, which may not appeal to all investors. However, for those seeking a more cautious yet potentially rewarding approach to earning passive income from MicroStrategy shares, the YieldMax ETF could be an intriguing option.