Summary Roundhill Ether Covered Call Strategy ETF fails to deliver on its objective of tracking ether and providing meaningful income. YETH's synthetic long options strategy significantly underperforms ether spot ETFs like ETHA, with only 8.9% return versus ETHA's 83% over the past year. The fund's high 0.95% expense ratio and poor structuring result in NAV erosion and misleadingly high distribution rates. Sell YETH and consider ETHA for direct ether exposure and better total return potential. Thesis We recently reviewed a very robust and well-structured fund from Roundhill, namely the Roundhill PLTR WeeklyPay ETF ( PLTW ). In that article we praised the asset manager on the fund and its structuring. Today we are going to tackle a different name from Roundhill, but one that sits at the opposite side of the spectrum, unfortunately. Today's article will deal with the Roundhill Ether Covered Call Strategy ETF ( YETH ), and will highlight why we are of the opinion the fund fails to achieve its goals. What does YETH actually do? Let us start by looking at the fund objective: The Roundhill Ether Covered Call Strategy ETF (“YETH”) seeks to offer exposure to ether*, subject to a cap, while providing the potential for current income. YETH is an actively-managed ETF. YETH is therefore a name that aims to extract dividends from ether's performance. An investor always has to keep in mind that such a fund, by design, is supposed to follow the total return provided by the underlying asset. An investor can always just buy ether outright via the iShares Ethereum Trust ETF ( ETHA ), and the only reason to go long on a name like YETH is to capitalize on constant gains harvesting, to the extent the fund is correctly structured. YETH employs a synthetic long structure via options A fund can achieve dividends from an underlying asset via various strategies: hold the asset and write covered calls do a total return swap with a bank use a synthetic long A synthetic long position is a financial strategy that is constructed to replicate the exact payoff and risk profile of owning the underlying asset without actually buying the asset outright. Now one can structure a robust synthetic long, and one can structure a poor synthetic long. Without getting too much into financial engineering terms, let us give you a flavor of the YETH holdings: Holdings (Fund Website) The fund uses the ProShares Ether ETF ( EETH ) and the iShares Ethereum Trust ETF ( ETHA ) as building blocks. ETHA tracks spot ether, while EETH aims to track ether via futures: Data by YCharts We can see a divergence in performance recently between a construct using futures and one using the spot reference asset. At the end of the day, as a retail investor, you do not need to know too much about how to build a synthetic long, but only observe if the manager is actually doing a good job. Let us have a look at how it works for this name. Performance - large basis Now that we have established what the fund aims to do and how it is built, let us see if it manages to achieve its goal: Data by YCharts The above chart is a total return graph for the three ETFs in the past year. Please note that YETH is astoundingly far off from the ether building blocks. A good dividend extractor would see a total return in a +/-10% band when benchmarked against the underlying asset. We have a basis of 60% to 74% here. How is this possible? Poor structuring. The synthetic long employed does not work well when benchmarked against an actual ether performance. Please note YETH retained all the downside from January 2025 to April 2025 but lagged significantly during an up market. For 0.95% in fees, this fund should do much, much better. Please note the ETF, just like any buy write fund on a volatile asset, shows very large distribution rates (60% currently). Ignore these figures since they are meaningless. The ETF has seen a significant NAV erosion, which has not been compensated enough by the dividend. In fact, in the past year the ETF has mustered a total return of only 8.9% when ether spot is up roughly 83%! What can an investor do here? Well, to put it succinctly, just don't buy YETH and buy ETHA outright. An investor can construct the dividend profile she/he desires via an outright purchase and small sales each month. Let us go through an example: you purchase $1,000 worth of ETHA after 1 month the position is up +12%, and you have $1,120 in your account you can just outright sell $120 worth of stock and give yourself a 144% annualized dividend rate (multiply 120 by 12 to annualize it and divide by 1000) The takeaway here is that extracting dividends from an asset is not that hard; it just takes very active management. Buying a fund that should do that for you is an alternative, but only when it actually achieves that goal. Mind you that YETH could do just what we outlined above, but then it would be hard pressed to charge you 0.95% for it. Instead it employs a complex options strategy, which just fails to achieve its goals. Conclusion YETH is an exchange-traded fund that aims to track ether and extract dividends from its appreciation. The name uses a complex synthetic long options strategy but fails to achieve its stated goal. Ether via ETHA is up almost +83% in the past year, while YETH has posted a paltry +8.9% gain. The structuring here is not great, and it should be changed. The ETF charges a 0.95% expense ratio for this endeavor. While we are sanguine ether into the year's end, we find YETH to be a poor vehicle to express that view. Sell YETH and buy ETHA instead.
