Summary Roundhill Bitcoin Covered Call Strategy ETF offers a high yield of nearly 55% with weekly distributions, but underperforms Bitcoin due to its capped upside and complex options strategy. The fund's distributions are primarily return-of-capital, making it tax-efficient but volatile, with income dependent on Bitcoin's volatility. Compared to MAXI, YBTC's capped upside limits its potential, making it less attractive despite its higher yield and frequent payouts. Aggressive investors might consider a small allocation in YBTC, but conservative investors should avoid it; I rate YBTC a hold. Introduction Recently, I covered a Bitcoin ( BTC-USD ) income fund called MAXI. After that article, I began to hear about other Bitcoin income ETFs, and in particular the Roundhill Bitcoin Covered Call Strategy ETF (YBTC) came up several times. I'm always searching for ETFs to build better portfolios with, and if this fund could replace MAXI in my portfolio, it's worth taking a look at. As far as I can tell, YBTC is the oldest Bitcoin covered call ETF on the market, so it has that going for it at the very least. Launched a little over a year ago in January 2024, YBTC has performed decently, returning 42% to shareholders in total return (which includes dividends paid, but not reinvested), and losing a little under 14% in price. This kind of erosion is expected for covered call funds, typically, and returns are expected to come primarily in the form of distributions. Data by YCharts Compared to BTC itself, the fund found itself lacking somewhat, returning less than half what BTC did over the same timeframe. That is to say, however, that owning BTC does not necessarily produce income on its own. While YBTC underperformed on the total return front, it did produce a very high yield all the while. YBTC Dividends & Yield YCharts only allows me to show TTM ("trailing twelve months") distribution rates, so this is zoomed into 2025, since there is no data from before that due to how young the fund is. The current rate, based on the TTM formula , is almost at 55%, having previously reached a high of nearly 57%. Data by YCharts The distributions come weekly, which can be relevant to some investors, especially those needing the income in order to pay for expenses, and prefer the weekly cash infusions over monthly like MAXI pays. In the two charts below, the "D" symbol denotes a distribution event. Data by YCharts The fund has only been paying weekly since 2025, and issued dividends monthly before that. That's why the actual dividends will be much higher than current ones, which are lower per payment since there are more of them. When looking at the full version of that chart, going back to inception, we see the older dividends at a much higher rate. Don't expect the fund to go back to those anytime soon, unless they go back to monthly distributions. The average of $0.50/share is much closer to the norm moving forward than the all-time $1.308/share average dividend. Data by YCharts The fund is actively managed, meaning that its dividends will be volatile, sometimes going as high as it was in April 2024, or as low as recently, a massive gap even when adjusting for the change from monthly to weekly payments. When looking at yields, make sure you understand which metric you are looking at for the fund, and what it represents. YCharts uses TTM, but the Roundhill website seems to be using a FWD or "forward" metric, as it advertises a far lower rate. Roundhill Investments Also, note the very low 30-Day SEC Yield. This is due to the way that rate is calculated, which only includes distributions of investment income. This means that the options income, premium received from the covered call strategy, doesn't count as it is classified as return-of-capital ("RoC") when distributed to shareholders. YBTC Tax Considerations When looking at the YBTC 19a-1 forms, where they classify their distributions, we see that returns from the last distribution were entirely RoC. Roundhill Investments They did experience a year-end investment income distribution, paid out on 12/31. This should be expected for the future end-of-year dividends as well, but the other weekly distributions will likely continue to be RoC. Roundhill Investments RoC isn't a bad thing, necessarily; this is not the fund just paying shareholders their own capital, it is how options premium is accounted for. Options premium distributions are taxable as RoC, and so Roundhill among other managers distributing options-based ETFs are opting to keep their distributions as close to 100% RoC as possible. It just changes how taxes are paid. Distributions that include RoC are counted against the cost-basis of your shares, and only create a taxable event when you sell those shares. This means that the income is tax-deferred until the sale of the shares, or until your cost-basis becomes zero. If you get to zero on your cost-basis, new RoC distributions would be considered long-term capital gains, according to this IRS publication . A nondividend distribution reduces the basis of your stock. It is not taxed until your basis in the stock is fully recovered. This nontaxable portion also is called a return of capital; it is a return of your investment in the stock of the company. If you buy stock in a corporation in different lots at different times, and you cannot definitely identify the shares subject to the nondividend distribution, reduce the basis of your earliest purchases first. When the basis of your stock has been reduced to zero, report any additional nondividend distribution you receive as a capital gain. Whether you report it as a long-term or short-term capital gain depends on how long you have held the stock... Example 1. You bought stock in 2010 for $100. In 2013, you received a nondividend distribution of $80. You did not include this amount in your income, but you reduced the basis of your stock to $20. You received a nondividend distribution of $30 in 2023. The first $20 of this amount reduced your basis to zero. You report the other $10 as a long-term capital gain for 2023. You must report as a long-term capital gain any nondividend distribution you receive on this stock in later years. Of course, this is only relevant to investors holding this fund outside a tax-advantaged account. It does mean that YBTC is "tax-efficient," so to speak, because it offers investors the flexibility of choosing when to create the taxable event, and at what may be a lower rate, depending on your tax situation. For most folks, their long-term capital gains tax rate will be lower than their income tax rate. YBTC Strategy & Holdings Followers of mine should have seen me write about the YieldMax family funds before. Roundhill operates essentially the same strategy as YieldMax funds do, which is that they open synthetic long positions using bought calls and sold puts on the iShares Bitcoin Trust ETF ( IBIT ) and the Bitcoin US ETF Index ( CBTX ), and sells call against those positions. If you want a deeper explanation and breakdown for this strategy, I suggest reading my article on AMZY , a YieldMax fund with the same principal strategy. This strategy results in YBTC's holdings looking like this, entirely options. Presumably, they are also holding 100% of NAV in cash to secure all of these options. That is also presumably where the net investment income is coming from in the year-end distributions. Roundhill Investments YBTC Risks There are several risks associated with this fund that investors need to consider when investing in YBTC. The first is that its upside exposure to Bitcoin is capped. Roundhill publishes the cap daily on its website . This shows us how much upside is left on the contracts traded; the fund is actively managed and trades essentially every day. Holdings and the caps are updated daily on the website, however, so it's relatively easy to keep track of if one wanted to do that. Roundhill Investments This cap is what leads to the inevitable underperformance of most of these kinds of funds to their reference assets, because they still incur all the downside of the reference asset, only buoyed by the income received. Data by YCharts They often lose more than they gain, since the gains are capped, which leads to losses that grind down the fund's price over time. Data by YCharts There is also great risk in the options strategy, as it is complex and is subject to price changes based on the underlying options math as opposed to spot exposure. Consider that volatility in the underlying asset, Bitcoin, creates higher premiums for YBTC, and thus more income. However, the opposite is also true, in that low volatility leads to lower income. Volatility can change the return profile of the fund dramatically, which is not present in holding Bitcoin on its own. One of the reasons I prefer MAXI is due to it not having an upside cap on BTC, and instead generating its income from options spread sold on indices and commodities. That has led to periodic outperformance and underperformance of Bitcoin itself, whereas YBTC has only trailed the asset. Data by YCharts Investors need to be comfortable with the possibility of this continuing, as well as the risk of inconsistent dividends due to their value being reliant on Bitcoin's volatility. Investors will have a very hard time anticipating future incomes because of this. Suitability I am recommending that investors carefully consider YBTC. Aggressive investors could consider up to a 3% allocation in a diversified portfolio, and moderate investors could consider up to a 1% allocation. Conservative investors are cautioned to stay away from cryptocurrencies entirely, let alone Bitcoin funds that sell options like YBTC. In my own portfolio, MAXI holds a 2.5% allocation. You can check that out here . I am giving YBTC a hold rating as I believe it is doing its job of generating Bitcoin income, but that a better alternative in MAXI exists that doesn't suffer from the same cap to Bitcoin. Conclusion Ultimately, the Roundhill Bitcoin Income Strategy ETF ( YBTC ) is a very high yield opportunity, and one that may pay off, but may not. Its upside cap to Bitcoin is very low, considering how volatile Bitcoin itself is, and its volatility toward the upside is one of the primary benefits to owning it in the first place. YBTC earns a hold because I believe that we have a better ETF on the marketplace for this job, but I can see why some investors would be interested in the fund for its high, weekly distributions. A rate of 55% is nothing to sneeze at, and YBTC is one of few funds that can claim that they distribute income every week. Thanks for reading.
