Roundhill Investments has introduced the first ETF in the US to deliver a covered call strategy based on the crypto asset Ether.
Ether has historically exhibited slightly higher volatility compared to Bitcoin.
The Roundhill Ether Covered Call Strategy ETF (YETH US) has been listed on Cboe BZX Exchange with an expense ratio of 0.95%.
A covered call is an options strategy whereby an investor holds a long position in an asset and sells or “writes” call options on that same asset in an attempt to generate more income (the additional income from option premium) than the asset would otherwise provide on its own from dividends or other distributions.
Ether is the second-largest crypto asset by market capitalization and the native token of the Ethereum blockchain which serves as the backbone for many emerging technologies including decentralized finance (DeFi), non-fungible tokens (NFTs), and decentralized applications.
The new ETF holds a long position in an ETF that tracks the price of Ether through futures contracts, while also selling out-of-the-money monthly call options on the same ETF to generate income. According to Roundhill, the fund’s covered call strategy is designed to deliver regular yield while still allowing for participation in the price movements of Ether, albeit with an upside cap.
YETH follows the successful launch of the Roundhill Bitcoin Covered Call Strategy ETF (YBTC US) in January, the first US-listed ETF to implement a covered call strategy on Bitcoin. While Bitcoin is traditionally a non-yielding asset, investors in the spot Ether market can stake their coins to earn yields. However, current spot Ether ETFs do not offer this feature, making YETH the only Ether ETF to provide an income stream.
Roundhill further notes that Ether’s historically higher volatility compared to Bitcoin can lead to higher option premiums, potentially enhancing the income generated through the covered call strategy.
Dave Mazza, Chief Strategy Officer at Roundhill Investments, commented: “YETH offers investors an attractive blend of high income potential and exposure to Ether. Investors have clamored for a covered call ETF with exposure to Ether, and we are proud to bring such a product to the US market.”