Grayscale Investments has introduced a new financial product aimed at providing income to investors engaged in the Ethereum market. The Ethereum Covered Call ETF (ETCO) was announced as a way to generate revenue by writing call options on exchange-traded products (ETPs) associated with Ether.
This actively managed fund is set to distribute income to its shareholders on a bi-weekly basis. According to Krista Lynch, senior vice president for ETF capital markets at Grayscale, ETCO’s creation focuses on adding an income component for investors who are already exposed to Ethereum.
The ETF’s primary goal is to prioritize current income while also seeking to benefit from price movements of Ether. Rather than directly investing in Ethereum, ETCO will sell call options on investment products like the Grayscale Ethereum Trust (ETHE) and the Grayscale Ethereum Mini Trust (ETH).
By positioning the fund to write options close to market prices, ETCO aims to collect premiums that can help soften volatility during market downturns, although this strategy also limits potential gains in bullish market conditions. The fund carries an expense ratio of approximately 0.66% and is committed to maintaining at least 80% of its assets in derivatives linked to Ethereum ETPs.
The overall strategy allows the fund to provide cash flow through premiums collected from the options contracts, a move that could appeal to investors seeking regular income, albeit with the acknowledgment that the upside is restricted during price rallies. ETCO is now part of Grayscale’s broader portfolio of income-oriented funds, which also includes the Bitcoin Covered Call ETF (BTCC) and the Grayscale Premium Income ETF (BPI).
Notably, Grayscale has been registered with the US Securities and Exchange Commission as an investment adviser since 2022. The company has emphasized that ETCO will not invest directly in digital assets but rather will depend on options contracts linked to ETPs. The fund is managed by Grayscale Advisors, LLC and distributed by Foreside Fund Services, LLC.
As developments continue, more details about the ETF’s performance and market reception are anticipated.
