Amplify Investments, managing $12.6 billion in assets, has filed for the creation of an XRP-based ETF that will use a covered call strategy for income generation.
Description of the XRP ETF
Amplify Investments has submitted a filing to the U.S. Securities and Exchange Commission (SEC) for the first XRP-based ETF, named the "Amplify XRP Monthly Option Income ETF." The ETF will track the price of XRP and generate monthly payouts through a covered call strategy. Unlike traditional ETFs that hold crypto assets, this product will use derivatives to track XRP's price movements.
Covered Call Strategy and Its Appeal to Investors
The ETF proposal includes a covered call strategy where options will be sold 5-10% out of the money. Options will typically mature within one week, and premiums from these sales will be used to create monthly distributions to investors. This strategy provides an income stream even when XRP's price is stagnant. Analysts note that funds using derivatives are often more appealing to regulators compared to funds that hold crypto assets directly.
Regulatory Context and Market Implications
The filing comes as the SEC reviews over 90 crypto ETF applications, including proposals tied to XRP and other cryptocurrencies. Recent developments, such as the approval of creations and redemptions in crypto ETFs, suggest that regulators are becoming more open to innovative fund structures. If an XRP ETF receives approval, it could attract significant capital, similar to the increases seen with Bitcoin ETFs.
Amplify's filing for an XRP option income ETF may be an important step towards expanding the market for derivative financial instruments and attracting institutional investors into the digital asset space.
