NEOS Bitcoin High Income ETF Utilizes A Call Option Strategy To Generate Double Digit Yields

Summary BTCI offers a unique way to generate high monthly income from Bitcoin’s volatility, with a current annualized yield exceeding 25%. The ETF uses a synthetic covered call strategy, trading off some BTC upside for immediate income, making it ideal for income-focused investors. BTCI has delivered a 54% total return since inception, combining strong income with capital appreciation, though it underperforms pure BTC exposure. Given BTCI’s track record and a pro-crypto environment, I am bullish and plan to add it to my income-focused portfolios for future upside. Bitcoin ( BTC-USD ) has proven many skeptics wrong over the past several years as it increased by 75.73% over the past year to $117,366. BTC is perceived as a store of value by many investors and despite large fluctuations in its share price it’s become an incredible investment opportunity that’s changed lives. BTC doesn’t generate income as it’s a decentralized digital currency which operates on a peer-to-peer network where the public transactions are recorded on the blockchain. NEOS Investments has created the NEOS Bitcoin High Income ETF ( BTCI ) for investors looking to generate large amounts of monthly income with exposure to BTC through exchange traded products that also provide the potential for capital appreciation when BTC appreciates. Some will say to just own BTC instead, but those investors are probably focused on capital appreciation rather than generating recurring income. BTCI is up 7% YTD and has delivered $9.98 of distribution income in 2025 which is a 16.90% yield on cost for anyone who started a position at the beginning of the year. BTCI has close to $500 million in assets under management (AUM) and after almost 1-year of being public its established a strong track record of income generation. I am bullish on several of the NEOS Investments ETF’s and the BTCI is going to be the 3 rd ETF from them that I allocate capital toward. BTCI is on track to deliver an annualized yield of roughly 27% and if BTC continues to appreciate I think BTCI will be in a position to not only appreciate in value but generate larger amounts of income in the future. Seeking Alpha Risks to investing in the NEOS Bitcoin High Income ETF While BTCI has an expected distribution rate that exceeds 25% there are significant risk factors that investors should consider. Everyone should do their own due diligence on BTCI before allocating capital toward it and not let the distribution yield blindly entice them. BTCI will invest at least 80% of its net assets in Spot Bitcoin Exchange Traded Products or options on Bitcoin Futures ETFs. BTCI’s share price will follow the direction of BTC which has been known to be extremely volatile over time. Investors could experience large price swings that result in capital depreciation. BTCI will utilize an option overlay strategy where they sell options to generate immediate income. If BTC continues to rally the options which are sold will likely limit BTCI’s upside potential causing it to underperform BTC and generate less capital appreciation. If for some reason BTC becomes less volatile in the future the premiums in the option market could change and BTCI may not be able to generate similar amounts of income as it currently does. BTCI is correlated to BTC and if for some reason BTC declines in value there is no risk mitigation through diversification or option strategies to soften the blow. Before allocating capital toward BTCI investors should understand that BTCI is focused on generating income and it will not track BTC on a 1:1 basis. Anyone interested in BTCI should conduct their own due diligence and understand that income is the primary focus of BTCI. How the NEOS Bitcoin High Income ETF is structured BTCI is an actively managed ETF that is focused on generating recurring income as its primary goal with a secondary objective of potentially producing capital appreciation. BTCI will invest in exchange-traded spot Bitcoin ETPs predominantly through a controlled foreign corporation while they will still have the ability to invest directly into Bitcoin ETPs. BTCI will obtain indirect Bitcoin exposure through ETFs that invest in Bitcoin future contracts. These ETFs will create exposure by deploying an option overlay strategy which includes selling put options and buying call options at the same stroke price. The spot Bitcoin ETP’s will track the price of BTC by holding actual BTC as their underlying asset. This will provide BTCI will the ability to benefit from BTC as the price appreciates by holding these Spot Bitcoin ETPs in a wholly owned and controlled foreign subsidiary. The option overlay strategy has 2 parts which include utilizing a synthetic strategy to gain exposure to the Bitcoin Futures ETF and writing call options on the Bitcoin Futures ETF to generate recurring monthly income. In order for BTCI to implement its Bitcoin Futures ETF options strategy it will invest in traditional exchange traded options or flexible exchange option (FLEX Options) that utilize the Bitcoin Futures ETF as the reference asset. BTCI’s exposure to the Bitcoin Futures ETF is obtained through utilizing the option market instead of owning BTC directly which will create synthetic exposure to BTC. The combination of puts and calls creates correlation to BTC in both directions. BTCI’s option income strategy is a synthetic covered call strategy because it doesn’t directly own the underlying asset its writing call options on. BTCI’s synthetic exposure to the Bitcoin Futures ETF will allow it to sell call options on Bitcoin Futures ETFs but it will be trading off most of the upside potential if BTC was to appreciate in value. If the Bitcoin Future ETF’s share price appreciates past the strike price of the options BTCI sells to generate income, then BTCI would lose money on those call options, and the loss will limit the upside potential of the synthetic long exposure. BTCI’s strategy will limit its participation in the gains from BTC’s upside potential as its converting potential upside of the price return growth of the Bitcoin Futures ETF and Spot Bitcoin ETPs into immediate income. The call options that BTCI sell will have expiration dates out 1 month and are expected to be held to expiration. Why I am bullish on the NEOS Bitcoin High Income ETF from an income perspective BTC has been volatile but a high performing asset over the years. The volatility on BTC has created an opportunity to generate large amounts of income from the premiums produced in the option market. So far BTCI has generated $13.97 in distributed income since October of 2024. BTCI’s monthly average distribution has been $1.40 since inception, which is a 2.21% monthly yield based on the current share price. The distributions BTCI has been able to generate haven’t fluctuated much and the yield is significantly higher than the risk-fee rate of return. Based on the current metrics, BTCI is on track to generate $16.77 of annualized distributable income which is an annualized yield of 26.54% based on the current share price. There aren’t many income investments that can replicate this level of distribution income especially in an environment where the Fed is expected to lower interest rates. I am bullish on BTCI’s ability to generate larger amounts of income in the future as the price for BTC climbs higher. Seeking Alpha In addition to distribution yields that exceed 25% BTCI has also produced a positive return for shareholders. Since inception BTCI has appreciated by $13.17 (26.34%) in addition to generating $13.97 (27.95%) of distributed income. The combination of appreciation and income has created a total return of 54.29% for shareholders of BTCI. While this has underperformed BTC, BTCI’s objective has never been to replicate the gains of BTC. The important metric to consider is that the way the option strategy is implemented doesn’t cap 100% of the upside for BTCI and there has been some upward trajectory to its share price. If you’re bullish on BTC and are looking for a way to generate income from it the BTCI’s structure is quite interesting as it’s establishing a track record of generating recurring income while being able to appreciate in value. Seeking Alpha Conclusion NEOS Investments has taken their call option strategies and applied it to BTC. While there will always be skeptics on BTC the historical performance of BTCI can’t be disputed. BTCI has been able to exceed a 2% monthly distribution yield and is on track to exceed an annualized distribution yield of 25%. I like BTCI because it provides indirect exposure to BTC and generates double-digit yields from its volatility. Now that there is clearer legislation in Washington and we seem to be in a pro-crypto environment I believe that BTC will continue to climb higher which is bullish for BTCI. If BTC continues to appreciate then BTCI could be in a position to generate larger levels of income while producing more capital appreciation for its shareholders. BTCI has established a strong track record of generating double digit yields without sacrificing all the upside potential which is bullish in my opinion. I plan on adding BTCI to my Dividend Harvesting Portfolio series on Seeking Alpha and potentially in my main income account as I see more upside potential in the future.

Source: Seeking Alpha