BlackRock's BITA Offers 13% Yield as Alternative to IBIT
The iShares Bitcoin Trust (NASDAQ:IBIT) offers investors a straightforward way to hold Bitcoin, but it has a major drawback: no cash flow. This can be a problem for income-focused portfolios or those requiring regular withdrawals. To address this issue, BlackRock launched the iShares Bitcoin Premium Income ETF (NASDAQ:BITA), which generates premium income through an actively managed options strategy.
BITA writes call options against its Bitcoin exposure and passes the collected premium to shareholders each month. Since its launch in July, BITA has paid out a total of $1.977 per share, resulting in a trailing distribution yield of approximately 13.41%. This is significantly higher than IBIT's performance.
However, it's essential to note that covered-call income comes at a cost: capping the upside on the portion of the book written against. In flat or choppy Bitcoin markets, BITA tends to outperform IBIT, while in sharp bull moves, IBIT wins on total return.
Investors can consider allocating a portion of their IBIT holdings to BITA within tax-advantaged accounts, allowing them to harvest the income without selling coins. But it's crucial to weigh the trade-off between upside participation and cash flow generation.