BITY: ~23.5% Distribution Rate While Targeting More Upside Participation In Bitcoin

Summary Amplify Bitcoin 2% Monthly Option Income ETF (BITY) offers income-focused investors exposure to Bitcoin with a covered call strategy and monthly ￰0￱ writes weekly call options 5-10% out-of-the-money, aiming for 24% annualized premium, which allows for greater potential upside participation than its sister fund, ￰1￱ ETF holds IBIT and cash equivalents, with most distributions currently classified as return of capital, which can be tax-advantaged if NAV and total returns remain ￰2￱ has slightly outperformed BAGY since inception due to its strategy, making it attractive for those seeking both Bitcoin exposure and regular ￰3￱ by Nick Ackerman, co-produced by Stanford Chemist There has been an increasing popularity among Bitcoin ( BTC-USD ) investing, with the SEC approving spot Bitcoin exchange-traded products in early ￰4￱ that it was a new asset, but it wasn't necessarily as easy to gain ￰5￱ creating a product that can be bought and sold on a public exchange, it could now easily be included in regular investors' brokerage accounts.

We've also been seeing a push into deriving 'income' from Bitcoin as well. We've covered several of these relatively newer ETFs now, where they can generate an income stream that's paid monthly (or even weekly on occasion) to investors from writing ￰6￱ latest we took a look at was the Amplify Bitcoin Max Income Covered Call ETF ( BAGY )—however, this fund has a sister fund from the same sponsor. That's the Amplify Bitcoin 2% Monthly Option Income ETF ( BITY ). BITY Basics Dividend Frequency: Monthly Dividend Yield: 2.43% SEC yield, 23.63% Distribution Yield Expense Ratio: 0.65% Leverage: N/A Managed Assets: $20.105 million Structure: Active ETF BITY's investment objective is "seeking to balance high income and capital appreciation through investment exposure to the price return of Bitcoin and a covered call strategy." In attempting to achieve that objective, the fund will "seek 24% annualized option premium, while also offering upside potential, by leveraging weekly options-writing techniques to harness volatility associated with the price of Bitcoin, transforming it into valuable income opportunities." BITY is a small fund in terms of managed assets.

However, it is interesting that it has garnered a bit more attention than ￰7￱ the time of writing, BAGY stands at around $17.2 million ￰8￱ Comparison The other funds we have covered in this space besides BAGY were the NEOS Bitcoin High Income ETF ( BTCI ), YieldMax Bitcoin Option Income Strategy ETF ( YBIT ) and Roundhill Bitcoin Covered Call Strategy ETF ( YBTC ). All of these funds take a slightly different approach, which creates some small, and sometimes not so small, divergences in ￰9￱ a performance measurement, we'll also be including iShares Bitcoin Trust ETF ( IBIT ). In looking at the total return results, we are limited to BITY and BAGY's inception date of April 29, 2025—as these were the latest to launch of the comparisons being ￰10￱ we can see, BITY has been a relatively weaker performer compared to the rest of the group, but it has still put up a more respectable return relative to ￰11￱ Portfolio Strategy Comparison YBIT has pretty consistently been the weakest performer, which is due to writing closer to the money options and not allowing much ￰12￱ are generally overwritten at nearly 100% of their portfolio—meaning that most of their total returns are coming specifically from the option premiums ￰13￱ creates a situation where, during times when the underlying Bitcoin exposure is rising briskly upward, like we have seen, that upside is capped for a fund like ￰14￱ other funds allow for further upside participation through either writing further out-of-the-money call options or not overwriting the notional value of their portfolio by 100%.

BTCI, for example, has flexibility in how overwritten their portfolio is—which has been roughly around 55% in both of my previous times looking at the ￰15￱ fund also utilizes a laddered approach, where they'll write a couple of different short call contracts at different strike ￰16￱ and YBTC overwrite nearly 100% of their portfolio but allow for some potential further upside by writing out-of-the-money call options. BAGY, for example, writes 5% OTM calls every ￰17￱ means that the fund can participate in up to 5% of BTC upside roughly every single week—which is quite often enough to see fairly limited slippage from the total returns relative to ￰18￱ BITY is a bit different is that they will write weekly options the same as BAGY, but between 5-10% ￰19￱ anticipate they can generate "24% premium on an annualized basis." As a side note, the 24% was also included in the fund's name previously, when it was named Amplify Bitcoin 24% Premium Income ￰20￱ reason the option premiums here can be so high is thanks to BTC being a more volatile asset; greater volatility means greater risk, and investors have to pay up for those ￰21￱ like BITY reap the rewards of paying up for said ￰22￱ it has often been said, when selling options, it is like you're selling insurance to the ￰23￱ greater volatility leading to greater risk, that is going to come with a higher ￰24￱ that said, in theory, BITY should have been able to deliver further upside compared to BAGY if they were writing further OTM and capturing further upside during the rising BTC price we've been seeing since the inception of these ￰25￱ BITY has slightly outperformed during this relatively short period of time, that does appear to be ￰26￱ the other hand, BAGY could outperform in a relatively flat or downward BTC environment because they'd be collecting more ￰27￱ worth noting that's when a fund like YBIT should also start to shine relative to these ￰28￱ interesting note is that BITY holds IBIT within its portfolio, along with its synthetic long position derived through ￰29￱ is, they buy calls and short puts on expirations that are relatively further ￰30￱ Holdings (Amplify) This is worth noting because while BAGY notes that they may derive long exposure via an ETP like IBIT, when we covered BAGY and as of the time of writing, they do not.

Instead, they are synthetically long ￰31￱ those who may be wondering where the SEC yield comes from, we can see that the fund also holds substantial exposure to cash equivalents like ￰32￱ and primarily a money market portfolio ( AGPXX ). The interest paid from these holdings is where the 'true' yield of the portfolio comes from, as opposed to the "distribution rate" being 23.63%. Monthly Pay Speaking of distribution rate or distribution yield, this fund delivers a monthly ￰33￱ has become quite common in this space, but for those curious, YBTC is a weekly ￰34￱ can make it somewhat more tempting for income-focused ￰35￱ hasn't been around too long, but for the most part, the distributions haven't varied too massively at this ￰36￱ an ETF, they often pay out what they receive each month to ￰37￱ some ETFs, but more commonly closed-end funds, will pay out a level distribution ￰38￱ Distribution History (Seeking Alpha) For tax purposes, we are seeing a large portion estimated to be return of capital, which is quite common for these call writing funds.

However, it is important to note that this is an estimate from the section 19a notice ￰39￱ tax classification at year's end can potentially change drastically. That's the only tax characterization that truly matters, too, the official after-year-end ￰40￱ Distribution Characterization Estimates (Amplify) With that said, seeing ROC distributions can make some investors wary because they automatically associate it with being ￰41￱ is more important, however, is the total returns and how the NAV is holding ￰42￱ the NAV and total returns are positive, then we know that some or even all of the ROC distributions wouldn't be ￰43￱ BITY, it launched around $50 and today stands at around $54—thus, we know it hasn't been destructive even if they are estimating there is ￰44￱ is a theme we've touched on a number of times , but it always remains important and a source of some ￰45￱ can actually be beneficial from a tax perspective, too, in that it reduces an investor's cost basis rather than becoming taxable in that year.

Then, if sold in the future and a gain is realized, you'd be looking at potentially long-term capital ￰46￱ can make it more favorable in a taxable ￰47￱ BITY is the sister fund of BAGY, and they take a fairly similar approach. However, instead of writing options 5% weekly OTM like BAGY, BITY tweaks this to 5-10%. That can make for further upside participation relative to its sister ￰48￱ slight difference can make a change over longer periods of time; we have already seen this start to play out ￰49￱ we've experienced a rather brisk move higher in Bitcoin during this period, as measured by IBIT, BITY has outperformed BAGY. Further, BITY has included IBIT exposure in its portfolio rather than the synthetic long option approach that BAGY has at this current time.