Grayscale has filed with the U.S. Securities and Exchange Commission for a new Zcash-linked exchange-traded fund designed to make cash distributions every two weeks. The proposed product, called the ZCSH High Income ETF, would not hold Zcash directly and instead would generate payout income through options tied to Grayscale’s existing spot Zcash ETF.

The filing was submitted on September 25 and could become effective about 75 days later, placing the earliest timeline in early December. The structure points to a growing effort to package crypto exposure into income-focused ETF products, while also highlighting the trade-offs that come with options-based strategies.

How the proposed fund would work

According to the filing, the ETF would use options linked to The Zcash ETF, trading under the ticker ZCSH, rather than owning ZEC itself. Grayscale said the fund would seek to mirror ZCSH’s price behavior by combining purchased call options with sold put options, then sell short-dated call options, generally with maturities of one month or less, to collect premiums.

Those option premiums would be the source of the fund’s biweekly shareholder distributions. The filing also says at least 80% of the fund’s net assets must be invested in options on Zcash exchange-traded products. Even so, the term “high income” does not mean a fixed return: the filing states there is no promised yield, and some distributions could amount to a return of investors’ own capital.

The trade-off behind the payouts

The income strategy comes with clear limits. By selling call options, the fund gives up part of the upside if Zcash rises above the selected strike price. In that scenario, investors would not fully participate in gains beyond that level.

At the same time, the filing says the downside remains. If Zcash falls, the fund can still absorb the full decline. Grayscale is therefore presenting the product as an income vehicle built on options premiums, not as a way to capture all of the underlying asset’s potential upside.

A new market with potential conflicts

The filing arrives while the market for options on the spot Zcash ETF is still very new. ZCSH itself began trading on August 25, and options on that fund started on September 8. That limited history is part of the backdrop for the proposed income ETF.

Grayscale also disclosed a conflict involving an affiliate of the fund’s adviser. That affiliate sponsors ZCSH and receives its fees, which Yahoo Finance lists at 2.50%. The filing says trading by the new income fund could increase demand for ZCSH and indirectly benefit the affiliate through higher fee revenue.

Why Grayscale is pursuing the structure now

The filing follows strong asset growth in Grayscale’s existing Zcash fund. ZCSH was converted from Grayscale’s 2017 trust with about $260 million in assets. By the week ending September 18, assets had climbed to $914.5 million, supported by $271 million in cumulative inflows.

During that same week, the fund brought in $98.2 million, the article says, the highest weekly total among crypto ETFs. Similar option-income structures are already being used in Bitcoin-related products, including Grayscale’s Bitcoin covered call ETF, while Goldman Sachs filed for a Bitcoin premium income fund in April.

What remains unknown

Several details of the proposed Zcash income ETF have not yet been filled in. The filing leaves the ticker, listing exchange, management fee, and sub-adviser blank.

For now, the next confirmed step is the SEC review process. If the filing moves forward on the timeline described, the product could become effective in early December, though the filing itself makes clear that the fund’s income level, market behavior, and investor outcomes would depend on how the options strategy performs.

Source: beincrypto.com