I Had No Interest In Bitcoin Until This Happened

Bitcoin, Covered Calls, Cryptocurrency, ETFs, Options, Volatility
by Tim Plaehn
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Confession: I had little interest in cryptocurrencies until companies started offering covered call strategy ETFs using Bitcoin. These funds provide me and my subscribers with an excellent opportunity to make money. However, even with the income from option selling, accumulating shares of these Bitcoin funds should happen over time and methodically.

From its history, it appears that the value of Bitcoin will move inevitably higher.

A graph with purple lines AI-generated content may be incorrect.

The chart also graphically shows the massive volatility swings that Bitcoin experiences. Just this year, the cryptocurrency lost 30%, then gained it back in just 10 weeks. Here is the year-to-date chart.

A graph with purple lines AI-generated content may be incorrect.

Puts and calls option premiums are a function of the underlying asset’s volatility. As a result, the ETFs employing covered call strategies on Bitcoin pay extremely attractive yields. My top choice for the ETF Income Edge service yields a 47% return.

However, I consistently advise investors to gradually accumulate shares of these ETFs over time, aiming to buy more on dips. While the future value of Bitcoin is unknowable, you can use the value in your account as a guide on whether to add more shares. If your position shows a negative value from the average cost, it is a good time to add shares. The deeper the discount in your account, the more shares you can add.

Eventually, your position will show a profit, and you will continue to earn an excellent dividend yield.

Today, I would like to mention two new Bitcoin-covered call ETFs, launched on April 29 by Amplify ETFs:

  • Amplify Bitcoin 2% Monthly Option Income ETF (BITY)
  • Amplify Bitcoin Max Income Covered Call ETF (BAGY)

Both funds employ the same strategy of selling weekly Bitcoin calls. The difference is that BAGY will be managed to maximize the option premiums earned and the distribution yield. As noted in the name, BITY targets 2% per month, or 24% per year, distributions. This ETF should allow the fund to capture more upside when Bitcoin moves higher.

I have added one of these two to the ETF Income Edge portfolio. I am excited to see how it performs and to accumulate shares on the dips in Bitcoin.

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Author: Tim PlaehnTim is the lead investment research analyst for income and dividend investing at Investors Alley. He is the editor for The Dividend Hunter, an investment advisory focused on creating a high-yield income stream and it's companion service The Dividend Hunter Insiders as well as Monthly Dividend Multiplier, a research service focused on dividend stocks using consistent dividend increases to drive capital appreciation. Most recently Tim has been delivering research on high-yield ETFs through his ETF Income Maximizer, ETF Income Edge, and ETF Income Trader research services. Prior to his work with Investors Alley, Tim was a stock broker, a Certified Financial Planner, and F-16 Fighter pilot and instructor with the United States Air Force. During his time in the service he was stationed at various military locations in the U.S., Europe, and Asia. Tim graduated from the United States Air Force Academy with a degree in mathematics. In his free time he tours the United States parks, campgrounds, and wilderness areas in his travel trailer.
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