Grayscale Eyes Yield with Bitcoin Covered Call ETF Filing

Grayscale Investments has filed an updated prospectus for its Bitcoin Covered Call ETF (exchange-traded fund).

 It signals a swift action after the Commodity Futures Trading Commission (CFTC) approved the listing of spot Bitcoin ETF options.

Grayscale Pursues Bitcoin Covered Call ETF

The fund, which will offer exposure to Bitcoin and the Grayscale Bitcoin Trust (GBTC), aims to generate income through actively managed call and put options on Bitcoin exchange-traded products (ETPs).  The prospectus was originally filed with the US Securities and Exchange Commission (SEC) in January 2024.

According to the filing, the ETF will achieve its objectives by providing exposure to GBTC. Beyond that, it will also employ a covered call strategy. This means it will sell call options to generate income while holding Bitcoin or GBTC as collateral. 

“The fund seeks to achieve its investment objective primarily through actively managed exposure to Grayscale Bitcoin Trust (GBTC) and the purchase and sale of a combination of call and put option contracts that utilize GBTC as the reference asset,” the January filing read. 

James Seyffart, an ETF analyst at Bloomberg Intelligence, commented on the development. In his opinion, Grayscale is capitalizing on the approval for Bitcoin ETF options. 

“Grayscale wasting no time after BTC ETF options approval. They’ve filed an updated prospectus for their Bitcoin Covered Call ETF (no ticker yet). The fund will offer exposure to GBTC and BTC while writing and/or buying options contracts on Bitcoin ETPs for income,” Seyffart remarked.

It comes after the US Securities and Exchange Commission’s (SEC) approval of options trading for spot Bitcoin ETFs. This regulatory milestone, announced last month, allows ETF issuers to integrate options strategies into their Bitcoin-focused funds. Among other benefits, this opens up new avenues for investment. 

The Office of the Comptroller of the Currency (OCC) is also preparing to launch options trading on the Bitcoin ETF. Eric Balchunas, another ETF industry expert, emphasized the significance of the CFTC’s decision. He said it cleared the way for more complex Bitcoin investment products.

With options now on the table, funds like Grayscale’s Covered Call ETF can cater to investors seeking yield in a volatile asset class. 

Grayscale’s ETF Strategy on a Broader Context

Grayscale’s filing for the Covered Call ETF is part of its larger push to establish itself as a leader in crypto ETFs. In October, the SEC acknowledged Grayscale’s application to convert its Digital Large Cap Fund into an ETF, which demonstrated the company’s commitment to diversifying its offerings. 

Additionally, Grayscale has been working with NYSE Arca to secure approval to list a range of ETFs, including those focused on digital assets beyond Bitcoin. These efforts reflect the firm’s strategy to bring institutional-grade financial products to the cryptocurrency market. 

The ability to integrate options trading into Bitcoin ETFs could mark a turning point for the crypto industry. Covered call strategies, which involve selling options on held assets, allow funds to generate steady income — a feature that may attract a broader spectrum of investors. 

Grayscale’s swift response to these developments and push for a Bitcoin Covered Call ETF reflects its agility in navigating the growing regulatory environment. By filing an updated prospectus for its Bitcoin Covered Call ETF, the firm positions itself to take advantage of the growing interest in options-based crypto investments. 

If approved, the Bitcoin Covered Call ETF could pave the way for a new generation of investment products that merge TradFi strategies with novel digital assets. With regulatory frameworks beginning to accommodate such innovations, the crypto investment space is poised for significant growth.

Nevertheless, the firm’s Ethereum ETF remains affected by redemptions, evidenced by five consecutive days of outflows since November 12.