Grayscale has debuted with ETCO, an active ETF that uses covered calls on Ether-linked ETPs to generate bi-weekly distributions; the news has also been reported by major financial information services Yahoo Finance.
The setup is clear: convert market volatility into recurring cash flows, without directly holding ETH in the portfolio. In this context, the product’s architecture is oriented towards distributing income on a regular basis while maintaining a disciplined operational profile.
According to the data collected by our research team, based on the prospectus and the initial trading sessions, the operational structure of the fund is consistent with the practices of covered‑call on ETP.
Industry analysts also note that the use of short-term T‑Bill as a liquidity component is a common choice for managing margins and periodic payments in funds that write options. For more insights on options in the crypto market, see our analysis on covered call strategies.
ETCO in summary
Ticker and market: ETCO on NYSE Arca.
Objective: maximize current income by writing calls on ETPs that track the price of Ether.
Exposure: indirect to Ether through derivatives on ETP (does not hold ETH spot).
Distributions: scheduled twice a month, targeting the 15th and the 30th of each month.
Current expenses: 0.66% annually, as stated in the official documentation of Grayscale Grayscale.
How ETCO Generates Income
The fund applies a covered call strategy on ETPs linked to Ether (e.g., ETHE and similar instruments).
In practice, it sells calls on these ETPs, collects the premiums, and after managing costs and any repositioning, distributes the amounts to shareholders, following the guidelines indicated by Grayscale Grayscale ETCO.
That said, the approach remains discretionary and oriented towards capturing premiums consistent with the risk profile/cost-benefit ratio of the mandate.
Source of yield: premiums from sold options and, to a lesser extent, interest on short-term T-Bills in the portfolio.
Operational impact: systematic writing and option rolling are executed in a discretionary/active manner by the manager, with periodic rebalancing.
Portfolio Structure and Liquidity Management
To support the strategy, ETCO maintains a predominant share in short-term US Treasury Securities and liquidity for margins and options settlements.
The sold calls are regularly renewed to maintain the target exposure and the ability to generate premiums.
It should be noted that this setup allows aligning cash availability with the operational needs typical of derivatives trading. For a focus on T-Bills and their importance in the portfolio, see this in-depth analysis.
Key Data at Launch (updated as of September 4, 2025)
NAV and market price: approximately 35.01 USD (data updated on 09/04/2025).
Assets Under Management (AUM): ~1,400,460.56 USD (data updated as of 09/04/2025).
Shares Outstanding: 40,000 (data updated as of 09/04/2025).
T‑Bill Allocation: ~83.31% of the portfolio in a T‑Bill maturing on 10/21/2025 (data updated as of 09/04/2025).
Distribution Calendar and Yield Methodology
Frequency: scheduled distributions twice a month, targeting the 15th and 30th.
Source of payments: net profit from investments (option premiums, interest) and realized capital gains.
Initial annualized yield: indicated as an estimate by the manager; for ETFs of this type, the practice is to annualize the latest or expected distributions relative to the current NAV. As it is a newly established fund, the metric is provisional and subject to change.
Main Risks and Trade-offs
Cap on the upside: by selling calls, the potential rise beyond the strike is limited to the premium received plus any distance from the strike.
Declines: market risk exposure remains, and while on one hand the premiums collected can alleviate losses, they do not eliminate the risk in case of a drop in Ether.
Derivatives and margins: potential margin calls and increased operational complexity.
Market liquidity: options on ETP crypto are an evolving market; spreads and depth may vary.
Fund size: Initial contained AUM may imply wider spreads in the early stages.
Regulatory risk: the regulatory framework for digital assets is constantly evolving. For an analysis of the regulations, we recommend reading our article Regulation of digital assets in Italy.
Quick Comparison with Alternatives
Ether spot ETF: replicate the price of ETH; they do not have an upside cap but do not generate income from options, showing greater sensitivity to market movements.
Covered-call on crypto (other vehicles): offer a similar income profile, but the results depend on the strike, tenor, and liquidity of the options of the individual product. For comparison with a similar product on Bitcoin, see the page dedicated to the Grayscale Bitcoin Covered Call ETF BTCC. Further details on strategies with Bitcoin are available in our in-depth analysis Bitcoin Covered Call Strategies.
DIY with options: they offer maximum flexibility on strike and expirations, but present high complexity, margin management, and operational risk borne by the investor.
Numerical Example (purely illustrative)
Let’s assume a NAV of 35.00 USD and a premium collected of 0.40 USD every two weeks (~1.14% of the NAV). If this dynamic were to consistently repeat (an unrealistic assumption in real markets), the annualized “simple” rate would be approximately 29% before costs and taxes.
That said, in the event of a strong bull movement of ETH beyond the strike, the fund’s gain would be capped, while in the case of a bear movement, the premiums could reduce, but not eliminate, the losses.
Who might consider it
Those who prioritize periodic income and can accept limited upside.
Those who want indirect exposure to Ether without having to directly manage options operations.
Who is willing to accept the typical volatility of digital assets and understands the risks associated with derivatives.
General Tax Implications (Italy)
For Italian fiscal investors, distributions from foreign ETFs are generally treated as capital income taxed at 26% and capital gains/losses as miscellaneous income (26%), with possible foreign withholding taxes applicable depending on the nature of the income.
The situation may vary based on the broker and the classification of the income: it is advisable to check the prospectus and consult a qualified tax advisor. In fact, any foreign withholding taxes can be recognized as a tax credit if properly documented, in compliance with current regulations.
Editorial Note
The numerical data reported is updated as of September 4, 2025; subsequent values may vary.
The precise methodology used by the manager to calculate the initial annualized return is not detailed in the public materials; it is recommended to read the prospectus.
Third-party sources with a performance history of ETCO are not currently available, as it is a newly launched fund.
This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.
Coupons every two weeks on Ethereum: Grayscale launches ETCO and aims to turn volatility into income
Grayscale has debuted with ETCO, an active ETF that uses covered calls on Ether-linked ETPs to generate bi-weekly distributions; the news has also been reported by major financial information services Yahoo Finance.
The setup is clear: convert market volatility into recurring cash flows, without directly holding ETH in the portfolio. In this context, the product’s architecture is oriented towards distributing income on a regular basis while maintaining a disciplined operational profile.
According to the data collected by our research team, based on the prospectus and the initial trading sessions, the operational structure of the fund is consistent with the practices of covered‑call on ETP.
Industry analysts also note that the use of short-term T‑Bill as a liquidity component is a common choice for managing margins and periodic payments in funds that write options. For more insights on options in the crypto market, see our analysis on covered call strategies.
ETCO in summary
Ticker and market: ETCO on NYSE Arca.
Objective: maximize current income by writing calls on ETPs that track the price of Ether.
Exposure: indirect to Ether through derivatives on ETP (does not hold ETH spot).
Distributions: scheduled twice a month, targeting the 15th and the 30th of each month.
Current expenses: 0.66% annually, as stated in the official documentation of Grayscale Grayscale.
How ETCO Generates Income
The fund applies a covered call strategy on ETPs linked to Ether (e.g., ETHE and similar instruments).
In practice, it sells calls on these ETPs, collects the premiums, and after managing costs and any repositioning, distributes the amounts to shareholders, following the guidelines indicated by Grayscale Grayscale ETCO.
That said, the approach remains discretionary and oriented towards capturing premiums consistent with the risk profile/cost-benefit ratio of the mandate.
Source of yield: premiums from sold options and, to a lesser extent, interest on short-term T-Bills in the portfolio.
Operational impact: systematic writing and option rolling are executed in a discretionary/active manner by the manager, with periodic rebalancing.
Portfolio Structure and Liquidity Management
To support the strategy, ETCO maintains a predominant share in short-term US Treasury Securities and liquidity for margins and options settlements.
The sold calls are regularly renewed to maintain the target exposure and the ability to generate premiums.
It should be noted that this setup allows aligning cash availability with the operational needs typical of derivatives trading. For a focus on T-Bills and their importance in the portfolio, see this in-depth analysis.
Key Data at Launch (updated as of September 4, 2025)
NAV and market price: approximately 35.01 USD (data updated on 09/04/2025).
Assets Under Management (AUM): ~1,400,460.56 USD (data updated as of 09/04/2025).
Shares Outstanding: 40,000 (data updated as of 09/04/2025).
T‑Bill Allocation: ~83.31% of the portfolio in a T‑Bill maturing on 10/21/2025 (data updated as of 09/04/2025).
Distribution Calendar and Yield Methodology
Frequency: scheduled distributions twice a month, targeting the 15th and 30th.
Source of payments: net profit from investments (option premiums, interest) and realized capital gains.
Initial annualized yield: indicated as an estimate by the manager; for ETFs of this type, the practice is to annualize the latest or expected distributions relative to the current NAV. As it is a newly established fund, the metric is provisional and subject to change.
Main Risks and Trade-offs
Cap on the upside: by selling calls, the potential rise beyond the strike is limited to the premium received plus any distance from the strike.
Declines: market risk exposure remains, and while on one hand the premiums collected can alleviate losses, they do not eliminate the risk in case of a drop in Ether.
Derivatives and margins: potential margin calls and increased operational complexity.
Market liquidity: options on ETP crypto are an evolving market; spreads and depth may vary.
Fund size: Initial contained AUM may imply wider spreads in the early stages.
Regulatory risk: the regulatory framework for digital assets is constantly evolving. For an analysis of the regulations, we recommend reading our article Regulation of digital assets in Italy.
Quick Comparison with Alternatives
Ether spot ETF: replicate the price of ETH; they do not have an upside cap but do not generate income from options, showing greater sensitivity to market movements.
Covered-call on crypto (other vehicles): offer a similar income profile, but the results depend on the strike, tenor, and liquidity of the options of the individual product. For comparison with a similar product on Bitcoin, see the page dedicated to the Grayscale Bitcoin Covered Call ETF BTCC. Further details on strategies with Bitcoin are available in our in-depth analysis Bitcoin Covered Call Strategies.
DIY with options: they offer maximum flexibility on strike and expirations, but present high complexity, margin management, and operational risk borne by the investor.
Numerical Example (purely illustrative)
Let’s assume a NAV of 35.00 USD and a premium collected of 0.40 USD every two weeks (~1.14% of the NAV). If this dynamic were to consistently repeat (an unrealistic assumption in real markets), the annualized “simple” rate would be approximately 29% before costs and taxes.
That said, in the event of a strong bull movement of ETH beyond the strike, the fund’s gain would be capped, while in the case of a bear movement, the premiums could reduce, but not eliminate, the losses.
Who might consider it
Those who prioritize periodic income and can accept limited upside.
Those who want indirect exposure to Ether without having to directly manage options operations.
Who is willing to accept the typical volatility of digital assets and understands the risks associated with derivatives.
General Tax Implications (Italy)
For Italian fiscal investors, distributions from foreign ETFs are generally treated as capital income taxed at 26% and capital gains/losses as miscellaneous income (26%), with possible foreign withholding taxes applicable depending on the nature of the income.
The situation may vary based on the broker and the classification of the income: it is advisable to check the prospectus and consult a qualified tax advisor. In fact, any foreign withholding taxes can be recognized as a tax credit if properly documented, in compliance with current regulations.
Editorial Note
The numerical data reported is updated as of September 4, 2025; subsequent values may vary.
The precise methodology used by the manager to calculate the initial annualized return is not detailed in the public materials; it is recommended to read the prospectus.
Third-party sources with a performance history of ETCO are not currently available, as it is a newly launched fund.