BTCI: Monetizing Bitcoin's Gains

Summary NEOS Bitcoin High Income ETF offers high monthly income via synthetic covered calls on Bitcoin, but lacks principal protection typical of income ￰0￱ has delivered a strong yield (about 29% forward) and positive total returns in its first year, benefiting from a bullish Bitcoin ￰1￱ fund's structure limits upside participation and exposes investors to significant downside risk if Bitcoin enters a prolonged bear ￰2￱ the risk profile and lack of capital preservation, BTCI earns a neutral Hold rating, suitable only for those seeking regular BTC ￰3￱ Bitcoin High Income ETF ( BTCI ) is one options income fund of ￰4￱ to Bitcoin ( BTC-USD ), there's a speculative element to ￰5￱ the crypto has had many tailwinds lately, the key shortcoming is the lack of features to secure one's principal, as is normally seen with income ￰6￱ Of The Fund According to its prospectus , BTCI produces income through "synthetic" covered ￰7￱ a general matter, synthetic covered calls entail three components: Selling put options on an underlying asset Buying a call option at the same strike as the put-write with its premium Selling calls on that call at a higher strike price The spread between the purchased and written calls is the basis for income, supported by short-term interest rates from the cash used in the ￰8￱ the case of BTCI, the underlying asset for these options positions is BTC. #1 and #2 on their own normally mimic the upside of BTC during the lifetimes of the contracts, but #3 places a ceiling on this at its own strike price, so the movement of BTC's price is important for these ￰9￱ 2025 Fact Sheet The table above from its fact sheet shows that management is not entirely synthetic in this ￰10￱ that time (September 30), most of the assets were in cash equivalents (Treasuries) to support the cash-secured puts, but a portion was invested in BTC ETFs as ￰11￱ approaches allow for a covered call ￰12￱ Holdings (BTCI Official Web Page) The most recent holdings show a similar approach, with marginal differences in position sizes and, naturally, newer ￰13￱ Official Web Page These positions are therefore actively managed according to a data-driven strategy that management believes will be effective over ￰14￱ And History Incepted in October 2024, the fund is just over a year old.

Let's look at the different ways it has rewarded shareholders in that ￰15￱ 1Y Dividend History (Seeking Alpha) Assessing its role as an income fund, BTCI has successfully paid dividends every month since then, with distributions ranging from $1.13 to $1.57. Starting at $50 per share, this works out to a yield on cost of about 33%. On a forward basis, this suggests a yield of 29%. BTCI ￰16￱ 1Y Price Returns (Seeking Alpha) Looking at price returns over the past year and comparing it to BTC, both are positive, but BTC has appreciated much ￰17￱ isn't surprising, considering there are no dividends from ￰18￱ ￰19￱ 1Y Total Returns (Seeking Alpha) Looking at total returns shows a much narrower ￰20￱ is naturally still ahead, lacking an expense ratio (0.99% for BTCI) or the friction that comes from actively traded ￰21￱ And Risks Even if BTC has delivered better returns, one might wonder if BTCI is a sound income vehicle, particularly in light of the strongly positive results in its first year.

First, I believe we should consider the timing of its ￰22￱ 5Y Price History (Seeking Alpha) As the fund was incepted in October 2024, it was positioned ideally for the outcome of the 2024 ￰23￱ will note that BTC's price immediately prior to President Trump's victory was about $68.8K. Since then, even in the pit of tariff-related fears within the broader market, BTC has not declined to that price ￰24￱ owes to Trump's friendly stance toward crypto that he adopted during the campaign, which later culminated in the passage of the GENIUS Act this summer. Nevertheless, hindsight reveals that prolonged periods of bullishness on BTC, as seen in 2020 and 2021, can be followed by similarly long periods of bearishness, as seen in 2022 and ￰25￱ could pose serious problems for an ETF like ￰26￱ is not an income fund in the normal sense that it invests in some kind of stable or secure ￰27￱ fact, the put-writes that account for most of its assets create an obligation to repurchase the BTC exposure at a loss if it goes down ￰28￱ I mentioned earlier, the covered call strategy limits upside, making it difficult to participate in rebounds and ￰29￱ ￰30￱ Total Returns (Seeking Alpha) If we compare YieldMax SMCI Option Income Strategy ETF ( SMCY ) and Super Micro Computer ( SMCI ), we see the difference for a similar strategy that incepted immediately prior to a crash in its underlying ￰31￱ of the rebounds in the underlying asset were shared, but we can see that it's always much more ￰32￱ result is negative total returns, while SMCI is slightly ￰33￱ timing of inception only helps to illustrate a ￰34￱ the income investor is concerned, their starting point is today, and so this risk is always on the table for them.

I cannot see how BTCI would be suitable for income investors who need to maintain their ￰35￱ investment in BTCI makes more sense for someone who wants to invest in BTC but regularly monetize some of the gains, as opposed to constantly ￰36￱ works perfectly for that, tantamount to paying a manager 99 BPS to trade your BTC ￰37￱ long as there are tailwinds for BTC, with growing adoption among individuals and institutions alike, this approach can work, but there isn't much one can do to manage their risk ￰38￱ BTCI has produced positive returns, riding the mostly bullish trajectory of BTC the past ￰39￱ long as this continues, shareholders can continue to rake in dividends at a high ￰40￱ the other direction, heavy capital losses can occur that are difficult to recuperate.

I am not worried about the direction of BTC, but as the fund doesn't position one well for risk management, I think it's better to give this a neutral Hold rating.