Grayscale files for zcash income ETF with biweekly payouts
Grayscale has filed a preliminary prospectus for the ZCSH High Income ETF, which would use options on zcash exchange-traded products to seek income paid every two weeks.
Key points
- Grayscale filed the proposed ZCSH High Income ETF on Sept. 25, with ticker, exchange and management fee left blank.
- The fund would aim to make distributions every two weeks, with amounts and character varying and possible return of capital.
- It would buy and sell options linked to zcash ETPs, using a synthetic covered call strategy rather than holding ZEC.
- The existing ZCSH zcash ETF launched on NYSE Arca on Aug. 25 and reached $1 billion in assets this month, per Grayscale.
- Grayscale requested an effective date 75 days after filing; the fund cannot be sold until the registration statement is effective.
Grayscale has filed a preliminary prospectus for a zcash income ETF that would use options to pursue payments every two weeks, Bitcoin.com News reports. The proposed ZCSH High Income ETF was filed on Sept. 25 and would give investors indirect exposure to zcash rather than holding the token itself.
The fund is separate from Grayscale's existing zcash ETF, which trades under the ticker ZCSH and holds ZEC. The income fund's own ticker and exchange are listed as pending, and its management fee is still blank in the filing. Investors would own shares in a fund that uses options, not shares in the existing ZCSH product or in ZEC.
New fund uses options
The proposal follows the Aug. 25 launch of ZCSH on NYSE Arca, with options on its shares beginning to trade on Sept. 8, according to the filing. Grayscale plans to use those contracts to build the income fund's exposure, giving the new proposal a different purpose from the ETF that holds zcash directly.
To pursue both zcash exposure and income, the fund would buy call options and sell put options linked to a zcash ETF. That combination is designed to approximate the ETF's price movements without holding its shares. The fund would also sell call options to collect premiums, an approach known as a synthetic covered call strategy.
How the income works
Those premiums come with a trade-off. Selling a call can limit gains above its strike price, even as the seller keeps exposure to losses if the referenced asset falls. Grayscale says it would select strike prices based on market conditions, so investors could receive distributions while capturing less of a sharp rise in ZCSH's share price.
The payout plan does not set a fixed yield. Grayscale says the amount and character of distributions would vary, and the fund may return investors' own capital as part of a payment. Its results may also diverge from movements in ZEC because of the options strategy.
Zcash products expand
The filing adds zcash to a growing set of products that use crypto-linked options to seek income. Blackrock's bitcoin covered-call ETF, which began trading on Nasdaq in June, similarly centres on collecting option premiums. Grayscale reported that its zcash ETF reached $1 billion in assets this month, though that growth reflects changes in ZEC's price as well as investor flows.
The prospectus remains preliminary and the income fund cannot be sold until its registration statement becomes effective. Grayscale has requested an effective date 75 days after filing, subject to the registration process.