Summary Roundhill Bitcoin Covered Call Strategy ETF offers a high yield (~49.2%) by harnessing Bitcoin volatility, with weekly payouts and a synthetic options strategy. YBTC's upside is capped and downside risk is significant; timing entry is critical, and a small, gradual position is recommended due to Bitcoin's volatility. Compared to peers like YBIT, YBTC has a lower expense ratio more resilient performance, and is best used as a supplement for investors already holding Bitcoin. I rate YBTC a buy after Bitcoin's pullback, highlighting its income potential, tax-efficient distributions, and suitability for those seeking high-risk, high-reward exposure. Overview I've accumulated a plethora of these higher-yield option ETFs, but I've avoided many of the crypto-focused choices out there due to timing. However, Bitcoin (BTC-USD) has recently pulled back nearly 30% from its all-time highs, and entry into some of these high yield ETFs seems a lot more enticing now. More specifically, I believe that the Roundhill Bitcoin Covered Call Strategy ETF ( YBTC ) is an attractive way to harness the volatility of Bitcoin and turn it into a weekly income stream. YBTC now offers a starting dividend yield of approximately 49.2%, with payouts being issued every Friday. Data by YCharts However, there are plenty of risks with a highly volatile asset like Bitcoin that should be considered. For instance, it's entirely possible that we see a continued decline further over the next twelve months. If the price of BTC continues to fall, the underlying NAV and payout amounts will also decrease for YBTC. So timing is very critical when it comes to a fund like YBTC. For this reason, I have only initiated a very small starting position and will gradually build more shares over time. Therefore, I would consider YBTC to be one of the higher risk/reward assets within the Roundhill arsenal. Despite the risk, YBTC has proven its ability to provide favorable returns when BTC is rallying higher. While you would certainly be better off directly owning BTC, I believe that a strategic use of YBTC can help investors benefit from the ongoing volatility in the near term. The fund is still relatively new with an inception dating back to only January of 2024. YBTC has a gross expense ratio of 0.96%, but this may be worth it considering the yield that's paid out to investors. So let's start by taking a look at the underlying strategy that YBTC implements to generate its income. Fund Strategy According to the latest fact sheet , YBTC has total assets under management of $326.3M. The fund's ultimate goal is to provide indirect exposure to the daily price movement of Bitcoin while also amplifying the income levels generated through the use of an option strategy. However, it's important to understand that YBTC technically implements a synthetic option writing strategy against Bitcoin. The term 'synthetic' simply means that YBTC does not directly own any Bitcoin. This can increase the overall risk profile due to the price volatility, but this can also allow YBTC to capture larger option premiums. As we can see from YBTC's holdings below, the fund holds no actual Bitcoin. Instead, YBTC is getting its exposure through call and put options written against the iShares Bitcoin Trust ETF ( IBIT ), which does actually hold Bitcoin. So the fund is essentially selling Bitcoin ETF call options at a strike price that is out of the money. This OTM (out-of-the-money) strategy allows some capital appreciation to be captured during rallies. However, the growth is still capped at whatever the selected strike price is. For instance, the prospectus lays out the following tradeoff: If the value of the Bitcoin ETFs appreciates in value beyond the strike price of one or more of the Bitcoin ETF Call Options that the Fund has sold to generate income, the Fund will lose money on those short call positions, and the losses will, in turn, limit the upside return of the Fund’s synthetic long exposure. Roundhill Investments While the upside growth is capped by the options, the downside risks are not. Simply put, if Bitcoin experiences a large pullback in price, so will YBTC. Therefore, the primary risk is a scenario where Bitcoin pulls back even further. BTC is a highly volatile asset that is known for very large price swings. So despite BTC's price falling back below $90,000, it can easily go much lower. It's so hard to gauge these price movements because sentiment among crypto investors can shift so rapidly. Since the upside movements are capped, this means that YBTC is unlikely to recover all of its share price when BTC finally does bounce and rally upwards. As we can see below, YBTC basically follows the same price movement as Bitcoin, so it's safe to assume that a continued decline would result in larger losses for existing YBTC holders. This is why I want to emphasize that timing on the entry is very important. Therefore, I've opted to implement a dollar cost average approach starting with a very small position size, just in case the share price falls even lower. Data by YCharts Performance Risk & Comparison I also want to emphasize that investors that are bullish on the outlook of Bitcoin are likely better off simply owning the underlying. Since YBTC's growth potential is capped, it's very probable that YBTC will underperform Bitcoin during a rally. Additionally, YBTC's high dividend yield doesn't automatically result in a higher total return over time. Just to demonstrate this weakness, we can refer to the performance chart below. As we can see, YBTC's share price has fallen by 38.77% since inception. When including all distributions paid out to shareholders, the total return jumps up above 43% over the same time frame. Meanwhile, BTC's price has increased over 103% over the same time frame. Therefore, I wouldn't recommend a position in YBTC if you aren't already exposed to Bitcoin in some capacity. Data by YCharts Therefore, it makes sense to utilize YBTC as an accompanying position, rather than a standalone fund. For instance, I currently own Bitcoin directly and have no intentions to sell. YBTC makes the most sense when utilized as a strategic way to harness the current volatility and choppiness of the price. Since the options will cap the upside growth, I believe that there are three ways to summarize the movement of YBTC. Bitcoin Rises = YBTC will underperform, but will provide attractive returns. YBTC's share price and payout amounts may rise. Bitcoin Trades Flat/Choppy = YBTC has the potential to outperform since the distributions can amplify returns. Bitcoin Declines = YBTC will suffer a large decline and payouts are at risk of being decreased. While there's a chance that payouts can help offset losses, YBTC will still likely lose value. Additionally, there are several peers out there that now implement a similar option strategy to generate income from Bitcoin. I believe that the most similar peer in terms of operating strategy and risk, is the YieldMax Bitcoin Option Strategy Income ETF ( YBIT ). As we can see below, YBIT is smaller in size since it only has $81.2M in assets under management, while also being less cost-efficient since the expense ratio sits at 4.76%. However, YBIT offers a slightly higher estimated annual distribution rate of 52%. Seeking Alpha These funds are very similar because YBIT also implements a synthetic option writing strategy to generate its income. Additionally, YBIT also issues payouts on a weekly basis. However, a quick performance comparison reveals that YBTC has been able to experience less of a price decline, while maintaining a higher total return when including all distributions. So despite YBIT's higher dividend yield, YBTC seems like the more resilient choice in the space. Data by YCharts Dividend Utility As of the latest declared weekly distribution of $0.2813 per share, the current dividend yield sits around 49.2%. However, the payout amounts are determined by factors like the success of the written options, momentum of Bitcoin, and implied volatility levels. Therefore, the yield is likely to be different by the time you read this article. Since the payout amounts are always shifting week after week, so is the estimated annual yield. Therefore, YBTC is not a great choice for investors seeking income reliability and consistent payout amounts. As we can see from the dividend history below, YBTC previously issued distributions on a monthly basis. The shift to weekly payouts only happened at the start of 2025. This weekly frequency can be appealing to investors seeking income flexibility within their portfolio. For instance, more frequent payouts means that investors have the ability to manually reinvest these distributions in other areas of their portfolio. Or perhaps these frequent payouts can be a supplemental income stream for retirees. Seeking Alpha However, we are talking about a distribution that is over 49%. I believe that if you time your entry correctly, investors have the ability to reach house money status within a two year time span. House money refers to the concept of receiving your initial investment back in the form of distributions. For instance, $10,000 invested is estimated to yield ~$4,920 annually. ~$4,920 X two years = $9,840 So within about a two-year time span, it's entirely possible to reach this house money status. Once this is achieved, an investor's risk profile is drastically reduced since the initially invested capital has been repaid. However, the investor would still own the shares that are consistently paying them income. Of course, this is a simplified view of the yield and this assumes that payouts remain consistent. Lastly, the fund seems to prioritize distributions that are tax-efficient. For instance, the latest section19(a) notice indicates that 100% of the latest payout was made up of return of capital. Unlike net investment income, return of capital distributions are not classified as income and therefore, aren't taxed as such. Instead, a return of capital distribution reduces an investor's cost basis and allows taxes to be deferred until the time of sale. However, it's important to note that the funding method for distributions change frequently, so there may still be tax consequences that investors need to consider. YBTC Section19(a) Notice Takeaway In conclusion, I rate YBTC as a buy at this time following Bitcoin's recent pullback. Although there can be further downside risk, I believe that this serves as a nice entry point for a smaller starting position. YBTC has proven that it can harness the volatility of Bitcoin and turn this into weekly income for shareholders. I believe that YBTC is the more compelling choice over YBIT, but the caveat is that a position only makes sense if you already hold Bitcoin in some capacity. Lastly, the distributions can be tax-efficient depending on their reliance on return of capital.
