Grayscale files for ZCSH High-Income ETF with biweekly payouts
Grayscale Funds Trust has asked the SEC to approve an options-based fund that would pay distributions every two weeks, separate from its existing Zcash ETF.
Key points
- Grayscale Funds Trust filed the ZCSH High-Income ETF proposal with the SEC on Sept. 25.
- The fund would not hold Zcash, instead using options on Zcash-linked exchange-traded products.
- It would sell call options for premium income and could hold short-term Treasuries and money-market funds as collateral.
- The existing Zcash ETF, also ticker ZCSH, reached $1 billion in assets on Sept. 24 after launching Aug. 25 on NYSE Arca.
- Ticker, exchange and management fee are listed as blanks, and Grayscale requested an effective date 75 days after filing.
Grayscale Funds Trust has filed a proposal with the United States Securities and Exchange Commission for the ZCSH High-Income ETF, an options-based fund that would aim to pay distributions every two weeks. The filing was made on Sept. 25, and the product is separate from Grayscale's existing Zcash ETF, which trades under the same ZCSH ticker and holds Zcash directly.
The proposed income fund would not own ZEC. According to the reporting, it would seek exposure through derivatives on Zcash-linked exchange-traded products and could hold short-term U.S. Treasuries and money-market funds as collateral. The prospectus lists the fund's ticker, exchange and management fee as blanks, with a ticker and exchange still pending.
The strategy is built around options rather than direct holdings. To track the Zcash ETF's price without owning its shares, the fund would buy call options and sell put options linked to a Zcash ETF. It would also sell call options to collect premiums, a structure known as a synthetic covered call strategy.
Options-based income plan
That premium income carries a trade-off. Selling a call can cap gains above the strike price, while the seller keeps exposure to losses if the referenced asset falls. Grayscale said it would pick strike prices based on market conditions, so investors could collect distributions while capturing less of a sharp rise in ZCSH's share price.
The payout plan does not lock in a fixed yield. Grayscale said the amount and character of distributions would vary, and the fund may return investors' own capital as part of a payment. Because results come from options rather than the asset itself, returns may diverge from movements in ZEC.
The filing landed as ZEC traded at $1,532.82, down 3.3% over the prior 24 hours but up 200% for the year so far, according to Ambcrypto. Open interest in ZEC rose from below $1 billion to around $3 billion, peaking near $3.5 billion around Sept. 19, while the token moved from roughly $500 to above $1,500. Ambcrypto tied some of the momentum to trader Garrett Jin closing a 38,000 ZEC short at an estimated $36 million loss.
Zcash price and positioning
The prospectus remains preliminary and the fund cannot be sold until its registration statement becomes effective. Grayscale requested an effective date 75 days after the Sept. 25 filing, and the fee, ticker and exchange are still unlisted, so the next steps are SEC review and completion of those blanks. Ambcrypto noted the SEC has not approved or disapproved the securities and the prospectus is subject to change.