First Trust Advisors LP, a top exchange-traded fund (ETF) provider, launched two bitcoin strategy ETFs this week: the FT Vest BTC Strategy Floor15 ETF – April (BFAP) and the FT Vest BTC Strategy & Target Income ETF (DFII). The funds represent the newest additions to the company’s expanding set of Target Outcome ETFs, which have over $28 billion in assets.
These new ETFs would allow investors access to bitcoin with the goal of shielding it against its well-documented volatility. BFAP, moreover, would provide a hedge by capping possible losses at 15% but offering some BTC upside. It would be a way for investors who wish to take advantage of the growth potential of BTC but not risk being hit by the steep declines.
DFII, by contrast, adopts a different strategy by employing options tactics in order to create returns. It holds an annual income objective of 15%, taking advantage of the high volatility of bitcoin by exploiting call and put options on BTC exposure instruments such as BTC ETPs (Exchange-Traded Products).
DFII’s Bitcoin options strategy
Both the ETFs are a part of First Trust’s objectives of offering outcome-based investment methodologies. BFAP employs short-term U.S. Treasury securities, cash equivalents, and options for applying a “target outcome strategy” that seeks to reduce the exposure on the downside while investing in the movements of the price of bitcoin.
DFII employs a more advanced investment strategy with a combination of call and put options. This makes the fund produce income but with some exposure to the BTC price movements.
It seeks to balance risk and reward in a volatile environment. Executed by the fund’s managers, Jeff Chang and Karan Sood, who are based at Vest Financial LLC, the technique provides stable income and a stake in the expanding digital assets arena.
Interest in digital assets is proliferating. In response, First Trust rolled out new funds that are specifically suited for the trend. The fund’s purpose is to allow investors a more regulated way to invest in crypto. It seeks to enable them to deal with the volatile nature of the exchange. All in all, the new ETFs provide greater stability in an uncertain space.
