Most income investors face a choice between dividend yield and option premium income. Traditional high-dividend stocks often lack the volatility needed to generate attractive option premiums, while volatile stocks suitable for option selling rarely pay meaningful dividends. The ProShares Bitcoin Strategy ETF (BITO) presents a rare opportunity to collect substantial income from both sources simultaneously.
During summer 2024, BITO delivered monthly dividends yielding 76% annualized in July and an extraordinary 90% annualized in June. These exceptional distributions resulted from the ETF's futures-based structure and favorable Bitcoin futures contango conditions. When combined with systematic covered call and cash-secured put premium collection, total returns exceeded 70% annualized from income alone, independent of any stock price appreciation.
This article demonstrates the complete implementation of a dual-income BITO strategy using both biweekly option contracts and single-contract cash-secured puts. You will learn why extending expiration dates from one week to two can triple premium collection, how BITO's monthly dividend payments influence option pricing, and the systematic workflow for managing multiple covered call contracts alongside ongoing put assignments to maximize total income generation.
BITO is not a traditional Bitcoin ETF that holds actual Bitcoin. Instead, it holds Bitcoin futures contracts, which creates a unique income-generating structure that produces monthly distributions unrelated to Bitcoin's spot price movements.
Bitcoin futures markets frequently trade in contango, where longer-dated contracts trade at higher prices than near-term contracts. BITO continuously sells expiring near-term contracts and purchases longer-dated contracts to maintain exposure. When the contango spread is wide, BITO sells low and buys high repeatedly, creating losses that must be distributed to shareholders through reverse capital gain distributions.
Paradoxically, what appears as a structural disadvantage (negative roll yield from contango) transforms into monthly income for shareholders. During periods of steep contango like summer 2024, these monthly distributions can reach extraordinary levels relative to the ETF's net asset value.
The demonstration references specific monthly distributions that illustrate BITO's income potential during favorable contango conditions:
| Month | Distribution Per Share | Annualized Yield |
|---|---|---|
| July 2024 | $1.50 | 76% |
| June 2024 | $1.77 | 90% |
These yields were calculated based on BITO's trading price around $23-24 during the distribution period. To annualize: ($1.77 × 12 months) / $23.50 share price = 90.3% annualized yield for June's distribution alone.
Several critical factors affect BITO dividend income that investors must understand:
The demonstration explicitly acknowledges trading BITO in both a paper account (for demonstration purposes) and a real money account (where actual dividends are collected). This dual-account approach allows transparent tracking of option mechanics while separately capturing real dividend income.
The demonstration begins by examining an existing BITO position that had been managed with monthly option contracts but is transitioning back to weekly expirations. This position review establishes the context for understanding cost basis, accumulated shares, and historical premium collection that informs current strategy decisions.
The trader reveals this BITO position was established approximately 30 days prior through a cash-secured put assignment at the $24 strike that added 100 shares. After that assignment, both a covered call and another cash-secured put were sold with approximately 30-day expirations.
During that month, the stock price declined significantly, dropping from the mid-$20s down into the low-$20s and even touching $19 briefly. This price decline caused the covered call strike at $29 to move far out of the money, becoming too expensive (in terms of opportunity cost) to maintain as the stock dropped further from the strike.
The trader acknowledges that the ideal approach would have been to roll the covered call down to a lower strike to collect additional premium, but instead chose to let it expire and pause covered call sales until the stock stabilized or began recovering.
After navigating through the broker's transaction history and filtering to show the past 30 days, the demonstration reveals the position consisted of 800 shares before the most recent assignment, built through multiple cash-secured put assignments during the decline from $33 to $19 over several months.
The current cost basis sits at $28.93 per share, representing the average assignment price across all accumulated positions. However, when adjusted for the $2,153 in total premium collected through all option transactions, the effective cost basis drops to $25.62 per share.
With the stock currently trading at $23.54, this creates an unrealized loss on the position. However, the premium collection has reduced the economic loss substantially compared to what it would be without the option income strategy.
The demonstration includes detailed chart analysis across multiple timeframes to contextualize the current position within BITO's recent price history:
One-Year Chart: Shows BITO's full range from a low of $12.79 to a high of $33.79, with the current $23.54 price sitting roughly in the middle. Multiple cash-secured put assignments are marked on the chart, illustrating systematic buying throughout the decline from $33.
90-Day Chart: Reveals more recent volatility with a high of $29 and low of $19.26. The current price sits near the 30-day high, suggesting potential resistance at current levels or possible continuation higher.
30-Day Chart: Shows the immediate price action from the $19 low to $24 high, with current price at $23.54. The trader notes this pattern suggests a potential uptrend developing, though acknowledging the stock remains volatile and unpredictable.
This multi-timeframe analysis establishes context for strike selection decisions: selling covered calls too close to the current price increases assignment risk if an uptrend continues, while selling cash-secured puts at the money provides attractive premium for continued position building during consolidation.
Before analyzing new option opportunities, the demonstration shows the complete workflow for recording the most recent cash-secured put transaction and resulting assignment in the MyATMM cost basis tracking system. This process captures the transaction history needed for accurate cost basis calculation and performance analysis.
The transaction entry begins by clicking to add a new position in MyATMM's cost basis tracker. The interface requires several specific data points from the broker's transaction history:
After entering these values and clicking save, MyATMM adds this transaction to the proposed records section, showing the $65 premium collected minus $0.02 in fees for a net credit of $64.98. Clicking the save icon moves this transaction from proposed to permanent history.
The cash-secured put expired in the money on July 19th when the stock closed at $23.54, below the $24 strike price. This triggered automatic assignment on Saturday, July 20th, requiring the trader to purchase 100 shares at the $24 strike price.
The demonstration shows this transaction appearing in the broker statement as a stock assignment of 100 shares at $24.00 on July 20th. To record this in MyATMM, the trader enters:
After clicking save, this assignment transaction moves to the permanent history and immediately updates the position metrics. The share count increases from 800 to 900 shares, and the average cost basis adjusts to reflect the new 100-share acquisition at $24, which was below the previous $28.93 average and therefore pulls the blended cost basis lower to $28.31.
Following the transaction recording, MyATMM displays the updated position status:
| Metric | Value |
|---|---|
| Total Shares Owned | 900 |
| Total Stock Cost | $22,650 |
| Current Market Value | $18,000 (at $20 per share) |
| Unrealized Loss | $3,800 |
| Total Premium Collected | $2,153 |
| Average Cost Basis | $28.31 |
| Cost Basis with Premium | $25.62 |
This comprehensive position view provides the foundation for informed strike selection in the next phase of the strategy.
With 900 shares now owned, the position supports selling 9 covered call contracts. The demonstration reveals a critical insight about premium collection efficiency: extending expiration from one week to two weeks can triple the premium while only doubling the time commitment, dramatically improving income per day of capital deployment.
The trader begins by filtering the option chain to display only $29 strikes, which sit above the $28.31 cost basis and therefore represent assignment-safe covered calls. This strike filter simplifies the option chain display, eliminating dozens of irrelevant strikes and focusing attention on the target price level.
However, examination of the $29 strike reveals disappointingly thin premium:
This premium structure demonstrates a key principle: when the two-week premium is double or triple the one-week premium, extending to two weeks generates substantially more income per day of capital deployment.
After placing the initial order at the $29 strike, the trader realizes that $28.50 strikes are also available and would provide even better premium while still sitting above the cost basis. After checking the option chain and finding $28.50s available, the $29 order is cancelled and replaced with $28.50 strikes.
The $28.50 strike premium shows:
Again, the two-week expiration offers nearly triple the premium of the one-week, making the extended timeframe far more attractive from an income-per-day perspective.
The demonstration reveals an important insight about why the two-week premium is particularly attractive in this case: the two-week expiration includes the ex-dividend date that falls on the first of the month. Since BITO pays monthly dividends with ex-dividend dates near month-end, option premiums for expirations that span the ex-dividend date incorporate some of the expected dividend value.
The trader notes this is why the premium triples rather than merely doubles: option sellers who hold through the ex-dividend date miss the dividend payment (it goes to the stock owner), so the option premium must compensate for that lost dividend. Option buyers, knowing they'll receive the dividend if assigned early, are willing to pay extra for that potential dividend capture.
The demonstration shows placing an order to sell 8 contracts (covering 800 of the 900 shares) at the $28.50 strike expiring in approximately 12 days:
This order is placed as a limit order at the mark price, giving reasonable probability of execution when the market opens while avoiding accepting the lower bid price of $0.22.
The final component of the weekly workflow involves selling an additional cash-secured put to continue building the BITO position systematically. The same premium-doubling principle observed with covered calls applies here: extending from one week to two weeks more than doubles the premium collected.
With BITO trading at $23.54, the demonstration focuses on the $23.50 strike as the closest at-the-money option. At-the-money strikes typically offer the best premium-to-probability balance, collecting significant time value while maintaining roughly 50% probability of expiring worthless versus being assigned.
The option chain displays the $23.50 put premium as:
The two-week premium of $1.88 represents significantly more than double the one-week $0.77 premium. Specifically, it's 2.44 times higher while only requiring 2 times the duration commitment. This premium structure makes the two-week expiration substantially more attractive from an income-per-day perspective.
The demonstration explains that this dramatic premium increase for the two-week expiration results from the upcoming ex-dividend date. Since the two-week expiration spans the ex-dividend date when BITO will pay its monthly distribution, option pricing incorporates the expected dividend value.
For put sellers, this creates an interesting dynamic: you're collecting extra premium that partially represents the dividend you would receive if you owned shares. In effect, the option premium includes compensation for the dividend you're not collecting since you don't yet own the shares (you're only obligated to buy them if assigned).
The trader notes that when trading BITO in a real money account, owning shares generates dividend income on top of the option premium. With 800 shares owned, the upcoming $1.50 per share July dividend would produce $1,200 in dividend income, representing substantial additional return beyond the option premiums being collected.
The demonstration shows placing an order to sell one cash-secured put contract:
This order is placed at the $1.88 mark price, positioned between the $1.78 bid and $1.98 ask, providing reasonable fill probability when the market opens.
The power of the BITO dual-income strategy becomes clear when calculating total income from all sources. This section breaks down the complete income picture including dividends, covered call premiums, and cash-secured put premiums to illustrate how the components combine to generate exceptional total returns.
From the positions demonstrated, the two-week cycle generates option premium from two sources:
Covered Call Income:
Cash-Secured Put Income:
Combined Option Income: $380 over 12 days, or approximately $31.67 per day
The demonstration references the exceptional dividend yields BITO generated during the demonstrated period. With 800 shares owned when the ex-dividend date occurs, the monthly dividend produces substantial additional income:
July 2024 Dividend:
June 2024 Dividend (for reference):
These monthly dividend payments represent income entirely separate from the option premium collection strategy. Share owners receive these distributions regardless of whether they sell options, making the combination particularly powerful.
Assuming both option orders fill as planned and the monthly dividend is received, the two-week cycle generates:
This $980 income on a position with current market value of approximately $18,800 (800 shares × $23.50) represents 5.2% return in just two weeks, which annualizes to approximately 135% if sustained throughout the year.
Several factors affect these return calculations that readers should understand:
The demonstration explicitly acknowledges that sustaining these return rates over long periods is unlikely due to changing market conditions, dividend fluctuations, and inevitable adjustments required as the position evolves.
The demonstration concludes by reconciling the paper trading account balance with the MyATMM cost basis tracker to ensure transaction recording accuracy, then discussing the transition back to weekly option expirations for future cycles.
After recording all transactions in MyATMM, the demonstration shows comparing the account balance in the broker platform against the balance shown in MyATMM's dashboard:
This balance matching confirms that all transactions have been recorded accurately with correct premium amounts, commissions, and fees. Maintaining this reconciliation discipline ensures the cost basis calculations remain accurate and provides confidence in the position metrics used for strike selection decisions.
The demonstration includes examining the premium collection history by month to assess how the transition to monthly options affected income generation. MyATMM's premium tracking feature displays monthly totals:
| Month | Premium Collected | Notes |
|---|---|---|
| April 2024 | ~$1,000 | Weekly options |
| May 2024 | ~$1,000 | Weekly options |
| June 2024 | $244 | Monthly options, very low |
| July 2024 | $350 (projected) | Transitioning back to weeklies |
The June decline to just $244 in premium collection demonstrates why the trader is transitioning back to weekly or biweekly expirations. The monthly approach reduced the number of premium-collection opportunities, substantially lowering total income despite initially seeming simpler to manage.
Going forward, the demonstration establishes a flexible approach rather than rigid weekly or monthly cycles:
This flexible approach optimizes income per day of capital deployment while maintaining regular premium collection cycles that compound over time.
While the demonstrated BITO strategy generated exceptional income during summer 2024, implementing this approach requires understanding several important considerations that affect its suitability for different investor profiles and market conditions.
The full strategy as demonstrated requires substantial capital deployment:
Investors with smaller accounts can scale the strategy proportionally, perhaps starting with 100 shares and one covered call contract, then building position size over time through cash-secured put assignments.
The exceptional 76-90% annualized dividend yields demonstrated cannot be assumed to continue indefinitely. Several factors affect BITO's dividend generation:
Investors should research current BITO dividend history and Bitcoin futures market conditions before assuming dividend income will match the demonstrated levels.
BITO's volatility creates both opportunity (higher option premiums) and risk (frequent assignments and rapid price movements):
The dual-income BITO strategy generates multiple tax events that increase reporting complexity:
Different account types have varying suitability for this strategy:
The BITO Bitcoin ETF presents a unique opportunity to generate income from both exceptional monthly dividends and systematic option premium collection. The strategy demonstrated combines these income sources to achieve total yields exceeding 70% annualized during favorable market conditions.
The dual-income BITO approach generates optimal results when:
While the demonstration showed exceptional income generation, investors should maintain realistic expectations:
BITO is subject to substantial risks including Bitcoin price volatility, futures market risk, contango and backwardation effects, tracking error, regulatory risk, and the risk of total loss. Bitcoin prices can decline rapidly and dramatically, potentially resulting in significant losses that exceed the premium income collected.
Options trading involves significant risk and is not suitable for all investors. Selling cash-secured puts obligates you to purchase shares at the strike price regardless of how far the stock declines. Covered calls cap upside potential and provide only limited downside protection equal to the premium received.
The dividend yields demonstrated (76-90% annualized) occurred during exceptional Bitcoin futures contango conditions in summer 2024. Future BITO distributions may be substantially lower or zero. Historical distributions do not predict or guarantee future distribution levels.
Cost basis tracking software provides data organization tools but does not constitute investment advice or recommendations. Past performance of any strategy, including premium and dividend income shown, does not guarantee future results. All trading decisions remain your sole responsibility.
This content is for educational purposes only and should not be considered financial advice or a recommendation to trade BITO or implement any particular strategy. Always consult with a qualified financial advisor before making investment decisions.
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