On Friday, Defiance ETFs expanded its leveraged ETF lineup with the launch of the Defiance Daily Target 2X Long RIOT ETF (RIOX).
As expected from a leveraged ETF, RIOX looks to provide double the daily percentage change in the share price of Riot Platforms (RIOT). The fund has a net expense ratio of 0.95%.
Riot Platforms engages in both bitcoin mining and digital infrastructure operations. According to Defiance ETFs, RIOX marks the first single-stock leveraged fund to focus on Riot Platforms.
An actively managed fund, RIOX uses a mix of swap agreements and options contracts to deliver leveraged exposure to Riot Platforms. The fund only seeks to provide leveraged exposure for single-day periods.
At the conclusion of each trading day, RIOX examines its swap agreements and options contracts based on market valuations. The fund then will rebalance its holdings to preserve exposure to about 200% of the share price for Riot Platforms.
When it comes to options contracts, RIOX will mostly employ in-the-money call options that are short-dated. These options can help the fund maintain its leveraged exposure and adapt to market factors that could affect swap agreements.
To hold its derivative positions, RIOX holds a variety of assets to serve as collateral. This includes U.S. government securities, money market funds, corporate debt, and short-term bond ETFs.
Building Leveraged Exposure to the Crypto Sector
“Building off the success of MSTX, RIOX offers investors a unique opportunity to amplify their exposure to the rapidly evolving blockchain and cryptocurrency mining sector,” noted Defiance ETFs CEO Sylvia Jablonski. “Riot Platforms has positioned itself as a leader in Bitcoin mining, not only by capitalizing on the growing demand for decentralized digital assets and infrastructure but also by strategically adding Bitcoin to its balance sheet, similar to MicroStrategy’s approach, further reinforcing its commitment to the crypto ecosystem.”
Given how Riot Platforms is a leading company in bitcoin mining, investors can use RIOX to make short-term plays on the price performance of bitcoin. However, investors should be mindful of the intrinsic risk that comes from leveraged ETFs.
That said, Defiance ETFs has a proven track record in navigating the investment space for leveraged ETFs. For instance, the Defiance Daily Target 2x Long MSTR ETF (MSTX) has well over $500 million in assets under management.
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