NEOS files to launch a “High Income” Ethereum ETF, using indirect ETP exposure to generate higher yields at an increased risk. The firm will create this opportunity through a system of puts and calls.
ETF analysts have theorized that Ethereum’s recent performance has encouraged this market to specialize. If institutional inflows continue at high rates, it will enable firms like NEOS to make risky plays at scale.
Ethereum ETF Market Gets Risky
Ethereum is doing incredibly well right now, leading some analysts to wonder if it could dethrone Bitcoin itself. Two weeks ago, Ethereum ETFs outpaced their BTC-based counterparts, shocking the markets as bullish momentum continues.
Evidently, this high performance is now leading to some interesting new product proposals.
Specifically, NEOS, an investment firm, just filed with the SEC to create a “high income” Ethereum ETF. Essentially, this product would differ from other ETH-based ETPs by focusing on maximum investor gains.
It won’t directly correlate with the token prices themselves, but instead focuses on investing in spot ETFs.
How Would This Product Work?
After investing in these funds, the high-income Ethereum ETF’s managers will generate risky, elevated yields by buying and selling puts and call options on these funds.
NEOS calls this a “synthetic covered call strategy” because it purely has indirect exposure to ETH, but this plan can juice higher incomes than a direct correlation.
NEOS has already been offering a similar high-income ETF for Bitcoin, but it’s expanding into new categories. Eric Balchunas, a Bloomberg ETF analyst, claimed that Ethereum’s recent performance is directly responsible for the filing.
If institutional investors keep giving these assets huge inflows, there will be more wiggle room to make riskier plays.
In essence, NEOS’ filing represents a maturing of the entire Ethereum ETF sector. At the moment, it’s unclear what the SEC will think of the issuer’s proposal. Either way, this increased market confidence seems like an encouraging signal.
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