Grayscale Investments launched a cover call Bitcoin exchange-traded fund (ETF), with the spot Bitcoin ETF being approved among 11 applications approved by the U.S. Securities and Exchange Commission (SEC) on January 10. I applied.
What exactly is included in a covered call Bitcoin ETF, and does it represent a safer or riskier investment for investors?
Grayscale applies for covered call Bitcoin ETF
On January 10, the SEC delivered positive news to the cryptocurrency community by approving applications for 11 spot Bitcoin ETFs from well-known U.S. asset firms. This expands accessibility for investors who are new to cryptocurrencies but prefer traditional investment methods such as stock portfolios.
However, later on January 11, one of the successful applicants, Grayscale Investments, applied for a covered call Bitcoin ETF that would allow investors to generate returns on options on the Grayscale Bitcoin Trust (GBTC). There was news that it was.
Covered call ETFs, common in traditional stock markets, can potentially improve investors’ returns by purchasing a variety of stocks and issuing call options on them.
The Street explains that covered call strategies for ETFs often involve selling out-of-the-money calls for a set period of time (usually less than two months). This means that the security price is below the call option strike price.
Therefore, investors can benefit from faster time decay through these short-term options.
Read more: How to Prepare for a Bitcoin ETF: A Step-by-Step Approach
Covered call ETFs are suitable for investors who anticipate minimal price fluctuations.
According to Investopedia, this strategy is suitable for investors who expect minimal changes in the underlying price over the long term.
However, investors who choose this option typically plan to hold their assets for a long period of time. Also, you choose this strategy to make money.
Grayscale received SEC approval for its spot Bitcoin ETF on January 10, but it wasn’t all smooth sailing. Property management companies had to navigate complex processes.
That included asking the U.S. District Court of Appeals last year to review the application.
In August 2023, BeInCrypto reported that the DC Circuit Court of Appeals granted Grayscale Investments’ petition to review the SEC order. The ruling invalidates an SEC order that had blocked Grayscale Bitcoin Trust from listing on the NYSE Arca exchange.
Read more: Who will own the most Bitcoin in 2024?
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