First Look at NEOS' New ETFs Before They Launch

[00:00:00]Hey everybody, welcome back to Defiance Stockpile. So, I'm happy to have Troy Kate, co-founder and managing partner over at Neos Investments back on the channel. And today we're going to be introducing two new income ETFs coming soon from Neos Investments. And we're also going to ask Troy some of his opinions on the current state of the market, as well as a little bit of background on Neos's product philosophy.

[00:00:21]So, Troy, welcome back to the channel.

[00:00:23]>> Hey Jeremy, how you doing? Uh happy to be back.

[00:00:26]>> Absolutely, doing well. Thanks for coming on. Always appreciate our conversations. You've been a great partner for the channel. I'm really excited to talk through some of these new ETFs you guys have coming out over the next couple months. It's really exciting and when we get some new product launches and Neos's strategies have always done really well in the market and really well for retail investors. So, I'm really looking forward to being able to present these today. Um before we talk about that, I wanted to kind of get your your opinion on a couple things are going on in the market right now. Obviously not financial advice or anything like that, but just you know, being in the market, being in the business, I wanted to get your feedback on a couple things.

[00:01:00]The first is related to the whole crypto space.

[00:01:03]Um a lot of people have been really struggling with the crypto type of investments over the last couple months.

[00:01:09]Bitcoin, Ethereum, things like that have been, you know, kind of on the downward slope, if you will, over the last few months.

[00:01:15]And obviously you guys have a couple crypto-related income ETFs, mainly BTCI um and the booster one XBCI. Can you give a little bit of insights on where you see the crypto space right now and how income investors might be able to um you know, deal with this crypto winter, if you will?

[00:01:34]>> Sure. So, it's it's as you said, the the crypto market, um you know, specifically around Bitcoin, Ethereum, and others has been um you know, selling off and coming in. There it we've had some spurts, some rallies like we've seen in the past day or so, um where we get a bounce.

[00:01:50]Um and maybe that's extended, you know, we've seen rallies last a couple weeks, a couple days, uh but it seems to be continuing to to trend down maybe with the um hopeful end of the war in the Middle East and a few other, you know, geopolitical events maybe calming down.

[00:02:05]Maybe that gives um kind of a base for the crypto markets. I don't know.

[00:02:10]Um but what we've seen in our products, so as you mentioned, we have BTCIR, Bitcoin High Income ETF. We have the boosted version, that's the levered version of it in XBCI. And then we have our Ethereum and ETHI.

[00:02:21]We've seen um kind of continued flows into those funds even with the sell-off. And I think when you think about um you know, what people have traditionally looked at for Bitcoin and the exposure to say Bitcoin in general or some other cryptocurrencies is that price entry point. Where do you enter? Um how do you take it, you know, how do you enter at the right point?

[00:02:46]Usually it's it's not the right point for most, but how do you enter at the right point and you know, figure out where to sell it then. And what we've tried to do is kind of maybe simplify that a little where you can enter in but still receive um some income on a monthly basis off the premium you're receiving from the volatility around those underlying holdings. So the volatility of Bitcoin and Ethereum is so much greater than the S&P, the Nasdaq, the Russell 2000 where you can get larger amounts of premium coming in by selling calls on a monthly basis um the way we do it and we're able to distribute out that premium. So it kind of brings you back to the person buying, are they looking for income, are they looking to take some risk inside a cryptocurrency portfolio like Bitcoin, Ethereum, or so forth? And then do they want to earn um some income off of it?

[00:03:41]And for us, I think we've seen a lot of, you know, people that we talk to, advisors and so forth that have s- found this uh a better way to enter the crypto space cuz they're not so concerned about price entry point because they want to take advantage more of the volatility around it because those premiums are so high. So, we've seen continued flows in the space.

[00:04:02]You know, I think um yes, if we turn around and we do get a nice rally in in crypto or Bitcoin in general, I think that'll be good for the overall space, but right now it has been a tough really 6 plus months in the space. We're talking from the fall to now. It's been a continued downward trend um with those bouts of different rallies. And so, we'll see if we've formed a base in here. We've had a rally coming off the news of the Middle East last week last weekend and see if we can continue maybe building from there. Um but it's something that we obviously watch closely because of our flows into those products. But overall again, those flows have continued during that time frame.

[00:04:44]>> Nice. That's good to hear that you're still receiving, you know, interest in the product and it's still growing even with the underlying assets, you know, on the lower side. And I mean, if you look back at Bitcoin's history, there's been these ups and down volatilities where there's multiple months of, you know, real strong downturns and then it it rallies back over the next couple years and so on. So, you I guess you just kind of have to understand that going in that Bitcoin and crypto is going to be more volatile. But of course, what I love about Neos is you get paid to hold it and paid for that volatility while you wait it out. Have you seen the premiums on the Bitcoin ETFs um you know, going up over the last couple months with all this uh up and down you're seeing in the market?

[00:05:22]>> Yeah, as we've seen the volatility, you know, we've seen these these bouts of volat- volatility where they spike and if we're rolling at that time, we've seen more premium come in uh during that time, but overall, um you know, the volatility for these cryptocurrencies, whether it's Ethereum, Bitcoin, are pretty elevated to start with.

[00:05:41]Um so, we continue to just manage the portfolio per our rules. And uh you know, as as we've talked about it before, those roll on a monthly basis, a little different than some of our fixed income products that might roll on a weekly basis. But, we're still seeing those levels of volatility, especially since the market continues to kind of churn lower.

[00:06:01]>> And I think that goes back to kind of like the philosophy behind Neos products. You guys have a very set rules based process that you guys follow, which is um you know, a lot of the newer ETFs are doing these dailies and weekly payouts and all kinds of different strategies. [clears throat] But, you guys have been pretty consistent in your approach both for your um equity as well as your fixed income. Can you just remind everyone kind of what your philosophy is behind um doing these income investments?

[00:06:25]>> Sure. So, um you know, we kind of have our ETF lineup broken up into a number of groups. So, we have 19 ETFs now, a few more on the way as you as you mentioned earlier. The 19 ETFs are really broken up into a fixed income category where we're rolling those option strategies on a weekly basis. So, very different than the rest of the portfolios.

[00:06:47]Um but, those we roll on a weekly and then on the equity high income, the hedged um equity income, the alternatives like cryptocurrency that we were just talking about, and of course, the boosted, which is our duos uh series, those are all rolling um the short calls on a monthly basis. So, we roll those short calls on a monthly basis with duration that's a little longer. And yes, we have rules that we follow um to say how far out of the money they're going to be. Looking at volatility and a few other factors also decides how much of the notional they're going to cover, um which is very different than as I said, the fixed income side. Those we're selling put spreads. We're not selling calls there.

[00:07:26]So, different strategy is called for, you know, different durations of option trades, different durations of, you know, when we're looking out and what we're doing in each portfolio. So, the more covered call type products are rolled on a monthly basis, but all of our strategies are rules-based, systematic in nature of when we're rolling, how we're rolling, um and we do that towards the end of the month.

[00:07:50]>> I love it. Yeah, there's so many new flavors, if you will. It's nice to see you guys have been consistent in your approach the whole time. So, people know exactly what they're getting into uh with the NEOS products. So, I appreciate you reviewing that again.

[00:08:02]All right, let's dig into these two new ones you guys have coming out. You know, I I guess at the beginning it's always exciting to see new products coming out new new strategies or new underlying.

[00:08:10]So, uh I'll leave leave it up to you uh which one you want to start with?

[00:08:14]>> Sure. So, we have two in registration, so I could really just talk about what has been filed for anybody to go um and read the prospectus. We wanted one in alternatives, which is uh the NEOS Silver High Income ETF.

[00:08:26]Um this is very similar to say how our gold product works, where we're going to be long exposure to silver maybe through an ETP and through a synthetic long via options. And then we'll be selling calls through our rules-based strategy to bring in um you know, premium that we can distribute out on a monthly basis. The other one is to add to our boosted series. Now, if you remember, we launched three boosted ETFs in February of this year and they've um really had some nice success with for us for what we're looking for from performance doing what they're supposed to do um and asset raise. So, we launched those uh boosted ones on SPYI, which is XSPY, on QQQI, which is XQQY, and as we were talking about before, the Bitcoin uh the boosted version of BTCI, which is XBCI. Um and we're bringing out a new one on our Russell 2000, IWMI. So, very excited um to bring out a boosted Russell 2000 High Income ETF. We've seen a lot of growth in our Russell 2000 fund. We've seen a lot of uh you know, talked to a lot of advisors, seeing people taking more um interest in um you know, small caps. And so, we thought it'd be nice to bring out a boosted version for those looking to take a little bit more equity wrestling. You know, we always talk about this is a levered product. Um, so you have to understand what that leverage gives you and what it can do um, if the market's going lower, how it can you know, detract from the portfolio. So, uh, really excited. We're hoping to bring these out um, you know, sometime towards the end of July, I think is uh, the time frame, maybe early August, depending on any comments from the staff. So, we're excited. Those are two more products that we have in registration and uh, we have plans for more this year. We just haven't put them into registration yet.

[00:10:08]So, really excited about that.

[00:10:10]>> Yeah, these are two great additions to your guys suite of uh, products. Again, the silver high income and the Russell 2000 boosted high income ETF. Uh, definitely, um, you know, a lot of people are going to be excited about those. I know a lot of people love your gold one and it's done really well. It's gotten quite a lot of uh, awards and so having a silver version um, is definitely going to appeal to a lot of people.

[00:10:31]Silver's been quite volatile over the last couple of years or so. Um, it used to be a very quiet part of the market, but you know, there's quite the rally early in the year and then a little bit of a dip right here. Um, so are you expecting it to continue to be a volatile asset or is it more like a middle of the road?

[00:10:46]>> I think we'll have to see what happens with it. There has obviously been some volatility, but we've seen that in gold as well. Um, a lot of people kind of forgot about gold for a long time and then here it's come roaring back and a lot of people are looking to get exposure to it or have had exposure to it and I think with our product, um, IAU I, um, I think a lot of people are looking how could they earn some kind of income off their gold position, which may be, you know, we talked to a lot of advisors that have a static percentage of gold in all their clients' portfolios, but if you never earn income and I think this is giving them an opportunity to have that long exposure to gold and um, earn some income and we're trying to do the same with silver.

[00:11:25]>> Yeah, love it. And to your point, neither of those pay income, so having an ETF that provides income goes a long way to allowing you to kind of hold on to it in the long run because you are getting that income while you wait for the the market uh changes.

[00:11:37]All right, so this boosted Russell 2000 one. Obviously, we know it's based on the small caps, but what does the boosted do? Can you explain how the leverage works or the boost works?

[00:11:46]>> Sure. So, it's looking to give you a total um exposure of 150%. So, taking 50% leverage um which if you look is um you know, maybe on the lower side of a lot of products that do it two or three X. We're not looking to do that. We're looking to give you enough exposure to not only bring in more premium because we're still writing more calls on that additional notional.

[00:12:09]Um so, you'll have potentially more premium coming in which can be distributed out in a larger distribution on a monthly basis, but also you know, a lot of people look at the covered call space and they're think they're missing out on a lot of the upside versus the underlying reference asset. And so, we're trying to give you that levered version. So, on the upside, you could potentially keep up with the underlying you know, small cap index. And that's what we did with all three products that we have out now and that's what we're looking to do with the Russell 2000. I think it's a space that obviously continues to grow. Small caps have been, you know, in focus this past year as we had some Fed cuts and we'll see what the Fed does for the rest of the year, but I think um if rates were to continue to come in which seems like possibly not for the rest of the year. So, we'll continue to keep an eye on that, uh but we do have a new Fed chair, but if rates come in, that's when these small caps usually do a little better because remember most of these small caps are borrowing a lot of money to continue their operations and if rates are lower for them, that's better for their business overall.

[00:13:13]>> Yeah. And just from a diversification aspect, it's really nice to be able to invest in some of the small companies so you're not just so overly weighted to the S&P 500 or the Nasdaq 100. All the big names having some diversity is always a good thing when it comes to investment strategy. And then with this you get some some boosted income in the meantime. So, um again, really great addition to your portfolio, really rounds out what you guys have to offer. Always looking forward to seeing what you guys have come out coming out next.

[00:13:38]And for these in particular, um can you talk about the payment frequency and maybe some of the potential tax implications?

[00:13:44]>> Sure. So, payment frequency um will be monthly like all of our ETFs currently pay monthly. Um we do stagger um payments in different groups. As you know, Neo's funds, if you were to own all the funds, you get a payment every week because, you know, week one we distribute the boosted income, week two of the month is fixed income, week three high income, and and week four is our hedge products. So, um these products will be on that same monthly distribution as everything else.

[00:14:11]Um and then around taxes, you know, we never know what the taxes are going to look like, but we try to use things like in IWMI, we use the Russell 2000 index options. So, we like those index options, which we talked about before for liquidity, for tax efficiency. We we're looking to continue to use those in the boosted version. Um for silver, um yeah, we'll be using flex options on some of the ETPs, and we'll see if we can get those um whether it's uh to get, you know, get an opinion where that looks like it's a 1256 contract on a commodity like we have with others. We'll see what we could do there, but we'll be doing the flex options on the silver product. And then on uh the boosted, we'll be using the Russell 2000 index options.

[00:14:57]>> Okay, awesome. Yeah, time will tell, but I'm really looking forward to it. I know you guys always look for the most tax-efficient way you can do it. So, I'm sure that whatever that happens to be, you'll find the most efficient one. So, I appreciate that.

[00:15:08]I know that these particular products aren't available on your website, but where can people get more information if they wanted to dig into the perspectives or, you know, whatever else is out there right now?

[00:15:17]>> Yeah, you can go to the SEC's website and pull up um the filing. You could look at both of them and kind of read through what we put out there in the A filing. That'll be updated down the road after the staff comes back with any comments and any updates that we need to possibly make. And then that'll kind of update what you know, what expense ratios look like and what tickers look like and and kind of have a final prospectus before launch. So right now this is the preliminary, you know, 485A filing.

[00:15:48]>> Awesome. I appreciate that. And I know you mentioned it a little bit. Can you remind us what your expected or hopeful launch date is for these?

[00:15:55]>> Yeah, we're hoping mid-summer, possibly end of July, early August is kind of the goal we're we're shooting for.

[00:16:01]>> Okay, awesome. And I know you guys have, you know, an X account LinkedIn account. You guys always post upcoming launches. So everyone keep a watch on that. Also go to you guys' website to get more information on when they do launch. So Troy, really appreciate coming on talking about these two new upcoming products.

[00:16:19]Just for everyone, we're talking about the Neos Silver High Income ETF and the Neos Boosted Russell 2000 High Income ETF that are going to be launching later this summer. Troy, really appreciate your time and best of luck with these ETFs.

[00:16:32]>> Thanks for having me.

[00:16:34]>> Thanks for watching. While you're here, check out this next video to learn more about dividends, income investing, and option selling. Make sure you subscribe, click the like button. It really does help. Thanks.