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FameEX Hot Topics | Asset Management Firm Introduces Dividend-Yielding ETF Tied to MicroStrategy Stock
2023-12-08 16:33:50
Investment firm YieldMax has taken a significant step by applying to the United States Securities and Exchange Commission (SEC) for approval to launch an innovative exchange-traded fund (ETF) that offers yield-bearing opportunities based on MicroStrategy shares. This ETF, named the "Option Income Strategy ETF," is scheduled for potential release in 2024, pending SEC approval. It will trade under the ticker symbol "MSTY," closely resembling MicroStrategy's existing ticker "MSTR."
What sets this ETF apart is its unique approach. It employs a "synthetic covered call" strategy, which combines buying call options with selling put options to generate revenue. This generated income will be distributed as monthly payouts to investors holding the MSTY ETF.
Crucially, the ETF will not directly own any MicroStrategy shares. Instead, it generates income exclusively through trading MSTR derivatives. To minimize potential losses, the fund imposes a limit on its exposure to a 15% gain on the call options each month. One noteworthy feature is that the monthly yields of the ETF are not directly tied to the performance of MicroStrategy shares. This means that investors can potentially earn yields from the ETF even if MicroStrategy stocks experience significant declines. While this ETF offers a unique investment proposition, some observers on X (formerly Twitter) have questioned why investors might choose it over directly buying MicroStrategy stock or its options. Yield-bearing ETFs are typically marketed to conservative investors seeking slightly above-average returns in the most volatile segments of the stock market. Due to the gain limits imposed by fund managers, these ETFs are viewed as a cautious yet potentially more profitable means of generating passive income from significant stock price fluctuations. YieldMax is already known for offering 18 similar ETF products linked to other major tech companies such as Tesla, Apple, and Nvidia. In 2023, MicroStrategy shareholders enjoyed remarkable gains, with the company's stock price surging by over 290% since the year's outset, as evidenced by TradingView data. One of the standout moments of the year occurred on November 30, when MicroStrategy co-founder Michael Saylor announced the acquisition of an additional 16,130 Bitcoins, amounting to approximately $593.3 million, with an average purchase price of $36,785 per Bitcoin. As of November 29, MicroStrategy holds approximately 174,530 BTC, valued at around $7.6 billion. The MSTY ETF has the potential to offer investors an alternative avenue to benefit from MicroStrategy's performance and the price movements of Bitcoin, marking an exciting development in the realm of investment options. It is expected to attract both conservative and innovative investors looking for diverse opportunities in the market. Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.
