Grayscale Launches Ethereum Covered Call ETF to Generate Income from ETH

Asset manager has announced the launch of its Ethereum Covered Call ETF (ETCO), which seeks to provide investors with exposure to ETH. The Grayscale Ethereum Covered Call ETF will mainly focus on generating income through its volatility characteristics.

Details On The Grayscale Ethereum Covered Call ETF

In a press release, the asset manager announced the launch of its Ethereum Covered Call ETF, which will provide exposure to the second-largest crypto by market. Grayscale noted that ETH represents a compelling diversification play for many investors in the crypto space.

The Grayscale Ethereum Covered Call ETF will offer a covered call writing strategy, providing investors with exposure to ETH’s volatility characteristics as a source of income. The Fund aims to generate current income, with a secondary objective of capturing returns linked to ETH.

Furthermore, the ETF will achieve its objective by using options on Ethereum ETPs that track the ETH price. Meanwhile, ETCO joins Grayscale’s list of income-focused products, including the Bitcoin Covered Call ETF (BTCC), which generates income from the flagship crypto.

Commenting on the launch of the Grayscale Ethereum Covered Call ETF, the firm’s Senior Vice President of ETF Capital Markets, Krista Lynch, remarked that they designed the Fund to complement an investor’s existing ETH exposure by adding an income component.

“We know that investors are all unique with different needs and investment goals, and 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,” Lynch added.

The Fund May Invest In ETHE and ETH ETFs

Grayscale stated that its Ethereum Covered Call ETF may invest in options on each of its Ethereum Trust ETF (ETHE) and its Ethereum Mini Trust ETF (ETH). To achieve its goals, the Fund will systematically write call options near current spot prices, aiming to capitalize on ETH’s volatility, which they then distribute to shareholders.

It is worth mentioning that Grayscale’s spot Ethereum ETFs, ETHE and ETH, are currently the second and fourth largest ETH Funds, with net assets of $4.80 billion and $3.18 billion, respectively. However, the asset manager notably had a head start, as it converted its ETHE Fund from a closed-end fund into an ETF.

Meanwhile, the launch of the Grayscale Covered Call ETF comes at a time when the ETH price is witnessing a resurgence. For context, the altcoin is up over 77% over the last 90 days and up 21% in the last month. ETH could still record significant gains with the Fed likely to make a rate cut at the next FOMC meeting.