NEOS Investments has filed a preliminary prospectus with the U.S. Securities and Exchange Commission (SEC) to launch the NEOS Ethereum High Income ETF. The fund aims to deliver above-average income by marrying Ethereum exposure with sophisticated options strategies.
Unlike conventional spot Ethereum ETFs, which simply track the price of the digital asset, the NEOS Ethereum High Income ETF aims for outsized yields. Instead of directly holding ETH, it will invest in spot Ethereum ETFs and augment returns by actively trading put and call options on those holdings. NEOS brands this as a “synthetic covered call strategy”, designed to provide steady income streams to investors while embracing higher risk and volatility than traditional ETH funds.
This move mimics NEOS’s earlier success with its high-income Bitcoin ETF and responds to explosive demand from investors seeking more than just price appreciation. Over the past weeks, Ethereum ETFs have even outpaced Bitcoin counterparts in institutional inflows, fueling a wave of product innovation and appetite for specialized yield-driven funds.
How the Ethereum High-Income ETF Works
The fund’s active options trading leverages volatility in the Ethereum ETF markets. By writing covered calls and utilizing other derivatives, NEOS can generate premiums, essentially selling the right to upside price movement, which translates to higher distributable income for shareholders.
This strategy is not for the faint of heart. The “high-yield” focus of the ETF comes with increased complexity and risk: market swings can impact both the spot ETF holdings and the overlaying options positions, amplifying both wins and losses. NEOS emphasizes that this product is intended for yield-seeking investors comfortable with the possibility of greater downside in pursuit of loftier returns.
While the filing marks a bold step, the NEOS Ethereum High Income ETF is not yet approved. The SEC will rigorously review the product’s structure, risk disclosures, and suitability for public investors. Approval could mark a significant milestone for both the ETF sector and crypto finance, enabling exposure to high-yield Ethereum investments in a regulated format.
If greenlit, NEOS’s ETF will join a fast-growing segment of crypto-linked yield products, potentially fueling innovation across asset managers and expanding choices for those seeking to generate income from digital assets.
READ MORE: Circle Stock Price at Risk of a Crash After its Earnings: Here’s Why
