When High Income and Bitcoin Exposure Combine: BITY & BAGY [ETF Watch Video]

BITY & BAGY Yields, Performance & Strategy: ETF Watch 

Join Christian Magoon as we dive into our groundbreaking Bitcoin* covered call ETFs, BITY and BAGY. Our latest episode unpacks how BITY and BAGY aim to deliver high option income and capital appreciation by using a covered call approach to capitalize on Bitcoin's volatility and growth.

Tune in for an in-depth discussion on the volatility of Bitcoin, yield strategies, performance, and how  BITY & BAGY stand out in the  ETF landscape.

Related ETFs

• BAGY: Amplify Bitcoin Max Income Covered Call ETF    Prospectus
• BITY: Amplify Bitcoin 2% Monthly Option Income ETF   Prospectus 
  
  
  

Additional Resources

• Amplify ETFs Yields

• Bitcoin Volatility

• Bitcoin Income Options

• Asset Class Return Map

Transcript:

Hi, welcome back to ETF Watch. It's Christian Magoon with Amplify ETFs.

00:06

Today's episode, we're going to focus on our most exciting new ETFs, which is BITY and BAGY.

00:12

These are covered call ETFs that focus on the growth and the income potential of Bitcoin.

So covered call Bitcoin ETFs, buckle up, we're going to get into it.

So Bitcoin's in the news this year, whether it's governments, corporations, Investors certainly looking at this as a new asset class, a finite source of assets with only 21 million Bitcoin ever going to be in existence per the code.

00:37

And there are portfolio benefits that Bitcoin brings to the table as well.

And that's mostly diversification. There's a very low correlation of Bitcoin to other asset classes.

Also volatility. Bitcoin has about four times more volatility than the S&P 500, which suggests to us that you can harvest that volatility through option writing in the form of covered calls to create a stream of income and not only participate in the growth of Bitcoin, but also create a very healthy stream of income along the way.

01:09

And that's where we'll get into our BITY and BAGY ETFs.

So let's start with our first Bitcoin covered call ETF, BITY, B-I-T-Y.

And this is an ETF that essentially is writing options on Bitcoin to produce an annualized yield of 24% or 2% a month.

01:29

How does it work?

First, we buy long Bitcoin exposure through Bitcoin ETPs and options.

Then we write or sell weekly covered call options on a portion of the portfolio, which are about 5 to 10% out of the money, to generate 2% monthly option income or 24% premium on an annualized basis.

One key point here is we are doing weekly call options, which give us the ability to reset each week and thus give us the potential for more upside in a month versus only writing monthly options.

When those weekly options expire, we roll those and replace with a new one to help generate ongoing option premiums.

And then we distribute, once a month, that option income.

02:17

So let's take a look at the first distribution for BITY.

As of May 31st, the distribution rate was 25.62%, quite healthy. 30-day SEC yield, 2.42%, but certainly a very attractive yield here. And how did that impact total return?

02:35

What if you just bought Bitcoin versus BITY? Well, let's take a look at the chart. Here's roughly the first 40 days or so the fund has been in existence. You can see the total return has been very appealing relative to just owning Bitcoin.

02:50

This is because we were able to participate in a fair amount of the upside of Bitcoin, but Bitcoin didn't go up the whole time.

There was some moderation in its return, and that allowed BITY to catch up due to the option income stream that it was able to harvest.

03:06

Again, this is a great example of how BITY balances capital appreciation with collecting option income to create, hopefully, a very attractive total return experience for investors.

03:19

So now let's move to the other Bitcoin covered call ETF at Amplify, BAGY.

This is an ETF that seeks to maximize current income through a covered call strategy tied to the investment exposure of Bitcoin.

BAGY seeks 30 to 60% annualized option income.

03:37

So let's look at the portfolio construction of BAGY.

Again, we're buying long Bitcoin exposure through Bitcoin ETPs and options.

Then we're selling weekly calls on all of the portfolio, 5% out of the money to maximize income.

This still provides about 5% Bitcoin upside potential on a weekly basis.

03:57

So again, you see a little bit of different dynamic here between BITY and BAGY and how they're both writing covered calls on a weekly basis, but targeting slightly different figures for different income and capital appreciation potential.

04:10

Like BITY, we're going to roll on a weekly basis the expiring covered call options replaced with new ones.

04:16

And just like BITY, BAGY will distribute each month.

04:20

So let's take a look at the yield numbers for BAGY.

You can see the first distribution here on a monthly basis, annualized to be 32.25%, a healthy step up from BITY, and the SEC yield at 3.10%.

04:35

Let's take a look at the total return of BAGY relative to Bitcoin.

And as you can see, a very appealing total return here.

In this case, over the first 40 or so days that BAGY's been out, we've seen markets kind of go up and then down in terms of prices.

And that's really benefited BAGY's approach to investing in this space.

04:59

Again, growth upside with the ability to write covered calls and generate option income for, again, what we believe will be attractive total return experience for investors over the long term.

So as you can see, we're really excited to add BITY and BAGY to the Amplify ETF suite.

05:18

Hey, if you're interested in products that produce attractive income, you need to go to amplifyETFs.com slash yields to sign up for our yield e-mail.

On that page, you can see all of our ETFs and their current yields, whether it's their distribution rate or the SEC yield.

You can also be kept up to date on a monthly basis when distributions come out.

05:40

We're building a very attractive, diverse income suite at Amplify, and we want you to be on top of the latest news.

05:47

So thanks for watching ETF Watch with Amplify ETFs.

We'll see you next time.

An option premium is the cost an option buyer pays to the seller for the right to trade an asset at a set price within a certain period.

Out of the money (OTM) options has a strike price that the underlying security has yet to reach.

The S&P 500 index tracks the performance of the 500 leading U.S. companies. The Bloomberg Bitcoin Index is designed to measure the performance of a single bitcoin traded in USD. Volatility is the annualized standard deviation of the relative price change for the 10 most recent trading days closing price, expressed as a percentage. 

Distribution Rate is the normalized current distribution (annualized) over NAV per share. 

30-Day SEC Yield is a standard yield calculation developed by the Securities and Exchange Commission that allows for fairer comparisons among bond funds. It is based on the most recent month end. This figure reflects the income earned from dividends – excluding option income – during the period after deducting the Fund’s expenses for the period.

*Bitcoin ETPs are exchange-traded investment products not registered under the 1940 Act that seek to generally match the performance of the price of Bitcoin, and trade intra-day on a national securities exchange. The Funds do not invest directly in Bitcoin.

BITY: There is no guarantee the Fund will achieve the Target Option Premium in any given year. If the NAV of the Fund remains level or decreases during any one-year period, the annualized premium generated by the Fund may be significantly less than the Target Option Premium for that time period.

Investing involves risk and possible loss of principal. There is no guarantee the investment strategy will be successful. The Fund is considered to be non-diversified. The Fund is actively managed and its performance reflects the investment decisions that the Adviser makes for the Fund.

The Fund faces risks by investing in Bitcoin through the Bitcoin ETP and Bitcoin ETP Options, as Bitcoin is a new and highly speculative investment. The market for Bitcoin is volatile and subject to rapid changes, regulatory actions, and numerous challenges to widespread adoption. Issues such as slow transaction processing, variable fees, and price volatility further increase these risks.

There is a lack of consensus regarding the regulation of digital assets, including Bitcoin, and their markets. Trading in shares of a Bitcoin ETP on U.S. securities exchanges may be halted due to market conditions or for reasons that, in the view of an exchange, make trading in shares of the Bitcoin ETP inadvisable.

Writing covered call options on the Bitcoin ETP might result in missed gains if the security’s value exceeds the strike price plus premium, and expose the Fund to losses if the security’s price falls.

Option contract prices are volatile and affected by changes in the underlying asset’s value, interest or currency rates, and expected volatility, all of which are influenced by political, fiscal, and monetary policies.

The Funds may use FLEX Options, which can be less liquid than standardized options. This may make it difficult to close out FLEX Options positions at desired times and prices.

With covered call risk, the Fund might miss out on profits if the security’s value rises above the option’s premium and strike price while still facing potential losses if the value declines.

With covered put risk, significant stock price increases can lead to substantial losses on your short position. The premium provides some income but may not fully offset the loss if the stock rallies unexpectedly.

The Funds currently expect to make distributions on a monthly basis, a portion of which may be considered return of capital.

Amplify Investments LLC serves as the investment adviser to the Funds. Kelly Strategic Management, LLC and Penserra Capital Management LLC each serve as investment sub-advisers to the Funds.