Why RS Crypto Income Fund Exists

As cryptocurrencies become more mainstream, this strategy looks to take advantage of high implied volatility to provide investors an alternative investment that generates income in all market environments. This will be accomplished with a fraction of the risk of direct Bitcoin exposure.

While several ETFs now exist with listed options tracking Bitcoin, the Fund currently trades options on two of them, IBIT and BITO. The primary focus is selling downside puts, although the managers will have the ability to sell calls if the opportunity arises. In addition, to take advantage of trading beyond regular market hours, futures can be used to hedge as well.

When selling puts, this strategy will never use leverage to generate income since puts will always be sold on a notional basis of the Fund’s AUM, not on a delta basis. Therefore, the Fund will never be overexposed beyond its capital to a potential negative market event. On the upside, if calls are sold, it will always be a fraction of the notional basis, typically never exceeding 30% of the exposure of the puts. For an investor wanting continuous income, getting paid up front and potentially having Bitcoin exposure at a lower price, this strategy will always mitigate the risk of owning Bitcoin outright.