This ETF offers exposure to crypto stocks along with the potential for monthly income distributions.
REX Financial launched a new exchange-traded fund (ETF) that provides investors with the opportunity to invest in top crypto-related stocks.
The REX Crypto Equity Premium Income ETF (NASDAQ:CEPI) provides exposure to leading crypto companies while also generating monthly income using an advanced covered call strategy.
It is the third covered call ETF from REX Financial, following the REX FANG and Innovation ETF (NASDAQ:FEPI) and the REX AI Equity Premium Income ETF (NASDAQ:AIPI).
Harnessing crypto’s volatility
The REX Crypto Equity Premium Income ETF tracks the BITA Crypto Assets & Digital Payments Index. This index includes the top 25 U.S. companies that are focused on crypto-related activities.
Specifically, the companies in this index are involved in cryptocurrency mining, trading, custody, as well as the creation of digital payment solutions. The index also includes blockchain technology stocks.
As part of its covered call strategy, this cryptocurrency ETF seeks income generation by “selling out of the money call options, harnessing crypto’s volatility while capping some of the potential stock gains.” This covered call approach enables the ETF to partially offset the effect of a price declines in the underlying security and provide monthly income.
The fund, via the index, is weighted by modified free float market capitalization. It is reconstituted quarterly and rebalanced monthly.
Currently, the five largest holdings in the ETF are Coinbase Global (NASDAQ:COIN), MicroStrategy (NASDAQ:MSTR), Robinhood (NASDAQ:HOOD), Marathon Digital (NASDAQ:MARA), and Tesla (NASDAQ:TSLA). The largest holding makes up about 6.8% of the portfolio.
“Crypto is transforming financial ecosystems and creating unique investment opportunities. With CEPI, we’re applying our targeted covered call strategy to the sector’s most disruptive companies, creating new opportunities for income generation,’ Greg King, CEO of REX Financial, said. “We remain committed to building first-of-their-kind tools to help traders and investors harness opportunities in the market.”
Also, this ETF has an expense ratio of 0.85%.
High distribution rates on other covered call ETFs
While the REX Crypto Equity Premium Income ETF, which launched December 4, won’t make its first income distribution until late January, REX’s other covered call ETFs have high distribution rates.
The REX FANG & Innovation Equity Premium Innovation ETF, which launched October 1, 2023, has amassed about $432 million in assets under management. It has returned 12% year-to-date and has a distribution rate of 25.2%.
The distribution rate is the annual yield an investor would receive if the most recently declared distribution, which includes option income, remained the same going forward. The last monthly payout on November 27 was $1.09 per share.
The REX AI Equity Premium Income ETF launched on June 4 of this year and has returned about 3.5% since then. It also offers monthly payouts at an annual distribution rate of 34.8%. The ETF’s most recent distribution on November 27 was $1.51 per share.
