Grayscale Launches Ethereum Covered Call to Generate Income

TLDR

Table of Contents

Grayscale’s ETCO ETF aims to generate income through ETH option premiums.
The ETF writes call options near ETH spot prices to deliver shareholder income.
ETCO may invest in options on ETH , Grayscale’s top ETH funds.
Ethereum price is up 77 percent in 90 days and 21 percent in the past month.

Grayscale has introduced a new exchange-traded fund aimed at generating income from Ethereum’s price movements. The fund, called the Grayscale Ethereum Covered Call ETF (ETCO), gives investors access to Ethereum’s volatility while aiming to provide regular income. This new product enters the market as Ethereum’s price continues to rebound, rising over 70% in the past three months.

New ETF Targets ETH Volatility for Income

Grayscale’s new offering, the Ethereum Covered Call ETF (ETCO), is designed to provide income using a covered call strategy. The company stated in a press release that the fund’s main goal is to generate current income. It will also attempt to capture returns tied to Ethereum (ETH), the second-largest cryptocurrency by market cap.

The ETF will use options on Ethereum-related exchange-traded products (ETPs) to meet its investment objectives. By writing call options near current spot prices, the fund aims to benefit from ETH’s price fluctuations. These earnings would then be distributed to shareholders. Grayscale believes this strategy may appeal to investors seeking additional yield from their ETH exposure.

Krista Lynch, Senior Vice President of ETF Capital Markets at Grayscale, said the fund is meant to “complement an investor’s existing ETH exposure by adding an income component.” She added, “We’re excited to introduce this new ETF as part of our commitment to providing innovative, outcome-oriented solutions that meet them where they are.”

Strategy Built Around Existing Ethereum Products

The ETF will invest in options based on Grayscale’s existing Ethereum ETFs, including the Ethereum Trust ETF and the Ethereum Mini Trust ETH ET. Both products are among the largest ETH funds in the market. As of now, ETH holds $4.80 billion in assets, while ETH manages $3.18 billion.

The fund’s covered call strategy means it will systematically sell call options at or near current ETH price levels. If ETH remains flat or rises only slightly, these options may expire worthless, allowing the ETF to retain the premium. If ETH rises sharply, gains may be capped, but the ETF still collects option income.

This approach is similar to the firm’s existing Bitcoin Covered Call ETF (BTCC), which uses a comparable strategy for Bitcoin. The company has said these products offer an income-focused approach to investing in cryptocurrency assets, especially during periods of high price volatility.

Launch Follows ETH Price Recovery

The launch of ETCO follows a strong rebound in Ethereum’s market value. ETH has risen by over 77% in the past 90 days, and more than 21% in the last month alone. Grayscale’s move comes as investor interest in ETH grows again, especially with the possibility of interest rate cuts from the Federal Reserve later this year.

This timing may help ETCO attract investors looking for exposure to ETH with an added income element. The firm also noted that the ETF could serve different types of investors, including those already holding Ethereum and those new to the asset class but seeking income.

Grayscale continues to expand its range of crypto investment products. With ETCO, the firm now offers both direct ETH exposure and an income strategy tied to Ethereum’s price action. The fund will trade under the ticker ETCO and is now available to investors across U.S. markets.

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