YieldMax, a specialized exchange-traded fund (ETF) firm, has submitted an application to the United States Securities and Exchange Commission (SEC) for the launch of a unique ETF product based on shares in MicroStrategy, the Bitcoin holding company helmed by Michael Saylor.
The proposed Option Income Strategy ETF is designed to offer investors monthly yields derived from MicroStrategy shares and is scheduled for release in 2024 pending SEC approval. This innovative ETF, trading under the ticker “MSTY,” will utilize a “synthetic covered call” strategy, a combination of buying call options and selling put options to generate revenue, which will be distributed to MSTY ETF holders as monthly payouts.
Interestingly, the ETF will not hold any actual MicroStrategy shares but will exclusively generate income through trading MSTR derivatives, thus reducing exposure to potential losses. The fund also limits its upside exposure to a 15% gain on the call options each month. Importantly, the monthly yields of the MSTY ETF will not be directly tied to the performance of MicroStrategy shares, providing investors with income even in the event of a significant decline in MicroStrategy’s stock price.
Yield-bearing ETFs: A conservative investment approach
The launch of YieldMax’s MSTY ETF raises questions about why investors might choose such a product instead of directly purchasing MicroStrategy stock or options. Yield-bearing ETFs, like MSTY, are typically marketed to conservative investors seeking slightly above-average returns from the often volatile stock market. These ETFs are viewed as a cautious yet potentially more profitable means of generating passive income from significant swings in stock prices.
YieldMax has a track record of offering similar ETF products tied to major tech companies such as Tesla, Apple, and Nvidia. The firm’s expertise in creating yield-bearing ETFs for tech giants indicates its confidence in the potential success of the proposed MSTY ETF based on MicroStrategy.
The expansion of their portfolio to include a MicroStrategy-linked ETF demonstrates their commitment to catering to a diverse range of investors seeking alternative income-generating options.
MicroStrategy’s remarkable year
MicroStrategy shareholders have experienced substantial gains throughout 2023. The company’s stock price has surged by over 290% since the beginning of the year. MicroStrategy’s co-founder and CEO, Michael Saylor, recently announced that the company acquired an additional 16,130 Bitcoins for approximately $593.3 million, at an average price of $36,785 per Bitcoin. As of November 29, the company holds a substantial 174,530 Bitcoins, valued at approximately $7.6 billion at the time of this publication.