Summary Benchmarking YBTC against YBIT shows YBTC has lower payouts but potentially better growth, making it suitable for investors seeking higher bitcoin exposure. YBIT offers quicker de-risking from bitcoin, making it ideal for those needing income and downside comfort, despite underperformance in up markets. YBTC outperforms in sideways to upward markets, while YBIT holds better in downtrends, highlighting their different risk-reward profiles. YBTC is more tax-efficient and has lower expenses, but investors should spread entries to average out NAV deviations due to bitcoin volatility. A previous article on YieldMax Bitcoin Option Income Strategy ETF (YBIT) , a similar option-based income ETF, will be a good starting point for the Roundhill Bitcoin Covered Call Strategy ETF ( YBTC ) . Since I had found YBIT a buy, benchmarking YBTC against YBIT should be sufficient to establish its suitability as an income plan. Unfortunately, neither YBTC nor YBIT disclose how they strategize strike selections, option repositioning frequency (rolling up or down when the theta is insignificant) or volatility harvesting. Hence, we will have to go with performance metrics as an indicator of what to expect. Apples to Apples Some income ETFs pay out less aggressively and keep exposure on the underlying lives for a longer tenure. In those cases, performance narratives could be very different. YBTC belongs somewhat to that category. Its payout yield of 42% , is well below the 85% payout seen for YBIT. What this means is that YBIT de-risks investors from the bitcoin underlying faster than YBTC. Whether that is good or bad depends on the investor's use case. Investors who want to deploy income elsewhere will like faster payouts. Investors who want greater exposure to bitcoin may prefer slower payouts. When I mentioned YBTC belonging "somewhat" to the less aggressive category, I was emphasizing on the fact that while its payout is indeed less than YBIT, it is still quite high (I would consider 10-20% payout yields as significantly conservative). It could be that YBTC strikes the sweet spot of payout vs growth, which we will see in our performance analysis. The yields data from Seeking Alpha for income plans often suffers from recency biases. Looking at the overall payouts from May 2024 to date, I see YBTC has paid out 40% of capital invested, while YBIT has paid out 50%. Still higher for YBIT, but not significantly so. Overall Performance Comparing performance across the common period of existence, an investment of $10K would have grown by 32% if invested in YBTC vs 11% in YBIT. This can be attributed to the bitcoin rally in the latter half of the period of analysis. Since YTC has greater exposure to bitcoin, it will do better in such markets. Data by YCharts Therefore, let us compare performance in a downtrend. I do not see a prolonged downturn period, which would have been better to gauge sustained impacts, but we will make do with what we have. For a very short period of down move in bitcoin between 20th May 2024 to July 5th 2024, we do see YBIT holding up better than YBTC (down by 12% and 16.5% respectively). Data by YCharts Another interesting period, between May 2024 to October 2024, paints a compelling story. In a period where bitcoin hardly moved close to close, YBTC tracked bitcoin better, slightly outperforming in down moves and underperforming in up moves to end up with a marginally better performance. YBIT, on the other hand, does much better in down markets, but suffers on up moves (due to larger payouts and lower exposure to bitcoin) and ends up far lower than either bitcoin or YBTC in a close to close rangebound market with volatile movements in the interim. I am attributing the performance differences mostly to the payout vs exposure to bitcoin factor. It could also very well be that YBTC's strategy is indeed superior. Regardless, the fact is that YBIT does better in downtrends, while YBTC outperforms in sideways to upward trending market cycles. Data by YCharts What to do with YBIT and YTC When I had given a buy rating to YBIT, it was primarily a vote for owning a significantly less volatile investment than bitcoin. Opinions may vary here, but those investors who believe bitcoin rides are scarier and need a less volatile income paying alternative will see utility in the buy call. Of course, the overall performance cuts because of the less volatile holding should balance out the rewards and YBIT's underperformance looked reasonable. Another income ETF or a perceivably lower volatile asset like Google will have to create a far better performance track record to be considered a buy. All things considered, here is the overall takeaway on a case by case basis 1. Heavily focused on income. Looking for a more market-agnostic income ride. More bearish on bitcoin (or need more downside comfort), but not totally a non-believer. Need quicker de-risking from the underlying - Buy YBIT 2. Believer in bitcoin. Whether you seek income or not - Buy bitcoin. If you seek income, you can replicate payouts from your capital and still beat any income plan. 3. Non-believer in bitcoin - Stay out of bitcoin, YBIT, YBTC. 4. Focused on income. Open to riding along with bitcoin to a larger extent. Less bearish on bitcoin, but not totally a believer. Want to seek more upside exposure - Buy YBTC. Hygiene Checks YBTC scores above YBIT in terms of expenses. YBTC's 0.95% fee is significantly lower than the 4.76% fee for YBIT. However, the performance data analyzed takes this into account. The premium and discount deviations to NAV show significant and material spikes, as is seen for YBIT due to bitcoin's sentiment volatilities. It is extremely important for investors to ensure, they spread their entries over a period of time to average out such discrepancies (rather than a bulk investment in one go). Premium Discount to NAV - YBTC (Roundhill Investments (YBTC)) Premium Discount to NAV - YBIT (YieldMax - YBIT) In terms of tax efficiencies, YBTC offers a dual advantage of delaying taxable payouts (lower payouts) and optimally categorizing it as return of capital which defers taxability and allows room for better growth. For taxable accounts, this is a major advantage over YBIT, where the payouts are not only higher but categorized as a mix of ordinary income and capital gains.
