Introduction
Building an income-focused portfolio can be tricky. Sometimes we have to sacrifice immense upside price potential for our desired income — especially when it comes to those high-octane growth stocks.
Lucky for us, over the last few years industry incumbents have introduced covered call option strategy ETFs for nearly every high-flying index out there — Nasdaq-100, Russell 2000, etc.
However, it wasn’t until recently that an income-focused alternative to these high-flying spot Bitcoin ETFs came about. As an income-focused investor, the NEOS Bitcoin High Income ETF (BTCI) is my favorite way to own Bitcoin.
By offering its investors a 28% annual distribution yield, this ETF is the best way to own Bitcoin in your portfolio if you care about both monthly income and potential price appreciation in rising markets.
In this analysis, I’m going to…
- Walk you through BTCI’s investment strategy
- Reflect upon its performance since inception
- Suggest where it might fit inside of your income-focused portfolio
Let’s dig in!
BTCI’s Investment Strategy
The NEOS Bitcoin High Income ETF (BATS:BTCI) seeks to distribute monthly income generated from writing call options on Bitcoin via Bitcoin index options — which seems to be the first ETF to do so. Given Bitcoin’s historically high volatility, the management team is able to write out-of-the-money call options that don’t cover the entire value of the portfolio. This means BTCI’s price has the opportunity to move up and down with the price of Bitcoin.
For example, as of 1/13/25 the fund left 22% of its notional value “uncapped.” In this scenario, that means 22% of the fund’s value can move freely alongside the price of Bitcoin — unburdened by the “cap” of the premium income generated by writing call options.
This specific strategy is important for two reasons:
- The Achilles heel of these covered call ETFs that could cause them to underperform their benchmark index is writing covered call options against …
Full story available on Benzinga.com