YieldMax Unveils Short COIN Option ETF Targeting Coinbase Decline

• YieldMax’s FIAT ETF aims to profit from a decline in Coinbase’s stock price using a synthetic covered put strategy.
• FIAT ETF’s strategy involves purchasing put options, writing call options, and shorting put options to generate income.
• YieldMax is expanding its crypto ETF offerings, including an Ether Option Income Strategy ETF targeting Ethereum volatility.

On NYSE Arca, YieldMax unveiled the FIAT ETF, their most recent Exchange-Traded Fund (ETF). With regard to bitcoin exchanges, this new fund seeks to provide short exposure to Coinbase Global Inc., the top player in the US.

The FIAT ETF is designed to capitalize on a decline in Coinbase’s stock price while generating passive monthly income. This fund employs a synthetic covered put strategy. The strategy involves purchasing put options, writing call options on COIN stock, and shorting put options with strike prices 0-15% below current prices to earn income.

Risks and Opportunities of FIAT ETF

However, this strategy comes with risks. The prospectus warns that while gains can be reaped from a decline in COIN’s stock price, losses may occur from short-put positions. The FIAT ETF will only benefit if there isn’t a drawdown in Coinbase’s stock price. Such a deal may turn into a loss for the fund in case the price of Coinbase’s shares is below the strike price of the option since the synthetic short position is abilities to earn money.

The research also shows that the Coinbase is this year up 45% and over the past year 173%. This increase happened in spite of the recent decrease in the price of bitcoin.

Emerging Trends in Crypto-Based Financial Instruments

An increasing number of financial instruments based on cryptocurrencies are available, like YieldMax’s FIAT ETF. This trend accelerated with the launch of Bitcoin spot ETFs in January. Other strategies, like Roundhill’s Bitcoin-covered call strategy ETF, target returns via options.

YieldMax is increasing its presence in the ETF market. The firm recently applied for an Ether Option Income Strategy ETF. This new fund will use a synthetic covered call strategy to capture volatility from Spot Ethereum ETFs. However, it will not include a fundamental investment in Ethereum or any Spot Ethereum ETF.

Tidal Investments will oversee the Ether Option Income Strategy ETF’s management, while ZEGA Financial will offer sub-advisory services. The ETF will operate using a “synthetic covered put” writing strategy. This involves buying put options and selling call options for COIN stock. The fund will also sell short-dated put options on COIN stock with strike prices 0%-15% below current prices, generating income.

YieldMax’s FIAT ETF joins a wave of sophisticated Wall Street products centered around crypto. Following the launch of Bitcoin spot ETFs, Roundhill introduced its Bitcoin Covered Call Strategy ETF. This fund used similar options arrangements, generating a 30% annualized yield on its opening day.