YieldMax, a private ETF provider, has submitted a proposal to the US Securities and Exchange Commission (SEC) to develop this unique ETF product based on MicroStrategy shares owned by Michael Saylor’s firm.
The proposed option income strategy is a product aimed at providing investors with monthly profits from MicroStrategy shares. Launch is scheduled for 2024, subject to SEC approval. This unique ETF trades under the ticker symbol “MSTY” and generates income using a “Synthetic Covered Call” strategy, which is a combination of purchasing call options and selling put options, with income in the form of monthly Payments distributed to MSTY ETF investors are payments.
All about the strategy
Surprisingly, the ETF would not own actual MicroStrategy shares but would generate income solely through MSTR derivatives, reducing the risk of potential losses. With a monthly gain of about 15% on call options, the fund also reduces its upside risk. Importantly, the MSTY ETF’s monthly returns are not directly linked to the performance of MicroStrategy shares and will provide investors with returns even if MicroStrategy’s share price falls significantly.
Why should investors prefer this?
The launch of YieldMax’s MSTY ETF raises the question of why investors would choose such a product over simply buying MicroStrategy shares or options. Yield-oriented ETFs like MSTY are often offered to conservative investors seeking slightly higher returns than the volatile stock market. Considered a passive money-making tool given the significant volatility in stock prices, these ETFs offer a prudent but potentially more lucrative way to generate alternative income.
YieldMax has a track record of providing comparable ETF products tied to major technology companies such as Tesla, Apple and Nvidia. The company’s ability to develop ETFs that generate returns for IT giants demonstrates its commitment to providing income-generating options to diverse investors.
An eventful year for MicroStrategy
Over the course of 2023, MicroStrategy shares saw significant returns. Since the beginning of the year, the company’s share price has risen more than 290%. MicroStrategy founder and CEO Michael Saylor announced the purchase of an additional 16,130 Bitcoins for approximately $593.3 million, with an average price of $36,785 per Bitcoin. As of November 29th, the company had around 174,530 Bitcoins, worth around $7.6 billion at the time of writing.
