Ethereum News Today: Grayscale Engineers Income Play for Ether Holders with New Covered Call ETF

Grayscale Investments, the world’s largest digital asset-focused investment platform, has launched the Grayscale Ethereum Covered Call ETF (Ticker: ETCO) on September 4, 2025, marking its second foray into covered call ETFs and expanding its growing suite of income-oriented crypto investment products. This ETF is structured as an actively managed fund, designed to generate income by writing call options on Ethereum ETPs, which are exchange-traded products that track the price performance of Ether. The strategy aims to leverage the volatility characteristics of Ether to provide a consistent yield to shareholders while maintaining exposure to the broader Ethereum market.

The Grayscale Ethereum Covered Call ETF is actively managed and employs a covered call strategy, wherein it systematically writes call options near current spot prices. The premiums collected from these options are distributed to investors on a bi-weekly basis. This approach is intended to provide a predictable income stream, which may appeal to investors seeking yield without fully divesting their Ethereum exposure. Additionally, the premiums may help cushion potential losses during market downturns, offering a layer of downside protection. The ETF commenced trading with an initial asset base of $1.36 million, consisting of 40,000 shares with a net asset value of $34.05 per share.

ETCO is positioned as a complementary product within Grayscale’s Ethereum ecosystem. It works alongside the firm’s existing Ethereum offerings, such as the Grayscale Ethereum Trust (ETHE) and the Grayscale Ethereum Mini Trust (ETH). Krista Lynch, Senior Vice President of ETF Capital Markets at Grayscale, emphasized that ETCO is not intended to replace direct Ethereum exposure but rather to enhance it by adding an income component. This diversification strategy allows investors to tailor their portfolios according to individual financial goals, combining growth potential with a regular cash flow.

The structure of ETCO involves indirect exposure to Ethereum through derivatives on ETPs. Specifically, the fund may invest in options on ETHE and ETH. These ETPs are sponsored by an affiliate of Grayscale, which receives administrative and marketing fees in exchange for its support. The use of derivatives introduces a layer of complexity and risk, as the ETF does not directly invest in digital assets. Instead, it gains synthetic exposure via options and ETPs, which themselves are subject to regulatory and market risks. Grayscale advises that the funds may not perfectly track the price movements of digital assets due to their indirect exposure.

The launch of ETCO reflects a broader trend in the crypto investment landscape, where firms are increasingly developing specialized products to cater to a diverse range of investor needs. By adapting traditional financial strategies, such as covered call writing, to the crypto market, Grayscale is addressing a growing demand for income-generating crypto investment vehicles. ETCO’s introduction is part of Grayscale’s continued innovation to serve a wide array of investors, including those who prioritize yield and risk management.

Grayscale’s Ethereum Covered Call ETF has a total expense ratio of 0.66%, making it relatively cost-efficient for an actively managed fund. The ETF is listed on the NYSE Arca and can be accessed through brokerage accounts, offering liquidity and ease of investment for retail and institutional investors alike. While the fund is newly established and lacks an operating history, Grayscale’s track record as a digital asset manager with over a decade of experience provides a level of confidence among potential investors.

Source:

[1] Grayscale Launches Next Innovation for Income-Seeking Investors with Grayscale Ethereum Covered Call ETF (Ticker: ETCO) (https://www.globenewswire.com/news-release/2025/09/04/3144437/0/en/Grayscale-Launches-Next-Innovation-for-Income-Seeking-Investors-with-Grayscale-Ethereum-Covered-Call-ETF-Ticker-ETCO.html)

[2] Grayscale Launches Its Second Covered Call ETF, This Time for Ethereum (https://crypto-economy.com/grayscale-launches-its-second-covered-call-etf-this-time-for-ethereum/)