Animal Spirits Podcast - Talk Your Book: Bitcoin for Anyone

Episode Date: February 3, 2025

On this episode of Animal Spirits: Talk Your Book, Michael Batnick and Ben Carlson are joined by Matt Kaufman, SVP, Head of ETFs at Calamos to discuss using downside protection for cash, understanding caps and buffers using Bitcoin, the Bitcoin options market coming online, how 24hr crypto trading affects the market, and much more! Find complete show notes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.   Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Past performance is not indicative of future results. The material discussed has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed.   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits Talk Your Book is brought to you by Calamos. Go to calamos.com to learn about the Calamos. Bitcoin Structured All Protection ETF. Brand new ETF just came out. Calamos.com to learn more. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Redholz wealth management. podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Britholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben.

Michael, when we come into these Talk Your Books, we will do some pre-studying on the fund or the strategy of the idea or the people. And everyone's a while we'll have a powwow and discuss What are we going to do here, right? You know our memes, the Winnie the Pooh. Yeah. Studying pre-research. Oh, there you go. And Calamos has this brand new Bitcoin Protection ETF.

And we've talked a lot about protection floor ceiling ETFs for the past few years, a place where we have been rightly bullish that people are going to want these sort of defined outcome, however you explain them, ETFs. And this one came out, and I saw a bunch of stories. this week and people on social media talking and going, who's this for? Right? Because it's full protection to the downside. If Bitcoin goes down, you do not lose money. One hundred percent protection. And 11 percent in change upside. And a bunch of people said, Bitcoin is this asset going to the moon? It's huge, huge returns going up. Why would you want this? And the idea

here, which Matt Kaufman from Calmos quickly told us, no, don't think of it as necessarily a Bitcoin strategy, think of it as an option strategy or a cash-like strategy, a way to equitize different asset classes. Cash, fixed income, high yield, maybe. And I got to say, this is a very interesting strategy. It's kind of hard to wrap your head around that this stuff is available for anyone to buy these days. Yeah, I don't want to step too much on the show because we got to all of this. So let's just, you know, with no further ado. Is that what they say? Yeah. So Matt Kaufman, who is the SVP and head of ETFs at Calamos did a really good job of explaining this to us. And I think five minutes in, you can hear the light bulb go off over both of our heads.

Like, ah, we kind of get this. All right. So listen, these are the kind of strategies that are not for everyone. They are definitely circumstantial and depend on your understanding of them. But I think we did a good job of, or Matt did a good job of explaining it in this talk. So here's our talk with Matt Kaufman from Calmos. Matt, last time we had you on the show, we discussed downside protection equity-linked funds. Wanted to get an update on those, and I think that's going to kind of color the conversation

today on the Bitcoin thing. So I'm just curious how people are using those. Are those mostly financial advisor-driven, take it any way you want? Yeah, I appreciate it. Thanks for having me. So last May, I think we were on, we were talking about our structured protection ETF series. They were all tied to equity markets like the S&P. E500, Russell 2000, NASDAQ 100, you could get the upside of those markets with no downside

risk over a one-year outcome period. We're really replicating and disrupting that capital protected structured note space, the fixed indexed annuities, index CDs, we're all delivering similar type upside. So now you can get that in the ETF world where you've got liquidity, transparency, 69 basis point expense ratio there. Nice. So that's, yeah, that's gone well. We've raised over 600 million and assets have come in about 100 million a month on average here.

So we're seeing a lot of adoption and uptake on that. We're seeing people tie their cash to the equity markets now, you know, be able to out-based inflation. Yeah, so you think about cash on the sidelines. If there's, you know, there's stats out there of multiple trillions of dollars in money market funds or index CDs, capital protected notes. So people are moving that money into capital-protected. equity growth now, you know, think about what you could get from a risk-free rate product. You might get 4% today, 4.5%. All of those products expire, and at expiration, you pay ordinary income tax rates. Well, when we do it inside the ETF, where you can use equity options that

are European style, so we won't have to get in the weeds there, but long story short, that's all treated as long-term capital gains. So if you've held for longer than one year, you will pay long-term capital gains rates as opposed to ordinary income. So you think about getting in the equity markets eight to 10% upside compounds year after year versus a two to three percent ordinary income return that you'll get after tax. It's remarkably more tax efficient. I'm not, I'm going to, I'm willing to admit this. I never would have thought of it this way. But so the idea is if you could get 100% protection on your downside or whatever it is and you get upside is kept at seven or eight percent, that gives you a potential premium over cash. So cash is giving you three to four. You could

get higher than that. Now, the downside is, of course, you could get lower than cash. But you're saying you're also not paying taxes along the way on the income. Exactly. Well, I guess the question is like, yeah, that would be your give up or your tradeoff is you could get lower than a cash rate. So you're trading in that two and a half percent after tax return and you're getting eight to 10 percent on the upside. Or we'll talk about Bitcoin and get even more upside. That's a tremendous power source for your cash. So it's a very counterintuitive but remarkable way to think about your safer money, you can now tie that to the equity markets, beat inflation, beat the risk-free rate through the growth of the equity markets. Especially with rates coming down. Maybe the idea is

something like, if you wanted to set expectations, listen, three out of every four years, you're probably going to beat that cash rate. And maybe one of the years, you're going to get 1% or 0% and that's the thing you have to be willing to risk is that you could lose to cash in some years. Yeah, that's right. The market could be down, which case you'd be down 60, basis points. But over time, you know, the market goes up, usually beyond that cap rate. And so you're going to grab, grab that upside with no downside risk. Yeah, it's a tremendous, tremendous tool in the portfolio. All right. So when thinking about Bitcoin with protection and caps, like my first thought is, why would you want to cap your Bitcoin upside? It's in the

whole point that it offers asymmetric upside. Like, you know you're not going to get 100% return to the S&P 500. Now, I'm not saying that Bitcoin will go up 100%. But it could. So why would you want to cap up a thousand percent? Yeah. Well, take it easy. Why would you want to cap that upside? But I guess your say is like, no, dummy, I'm not suggesting.

And I'm not saying that you're giving investing advice. But just the idea is that this, the person that would buy this Bitcoin product is not necessarily not buying Bitcoin and buying this. It's somebody that's putting money to work that would be in a less, a more conservative bucket, which also sounds equally crazy. It's like, wait a minute, Matt, you're telling me to take money. out of my money market fund and buy Bitcoin. Now, I understand the story, so why don't you give your, why don't you give the story?

Yeah, well, first, I'll never call you a dummy. Yeah, there's no dummies in this early. There's a reason you got where you got. But in terms of Bitcoin exposure, you know, we have a product line. We've launched the world's first protected Bitcoin ETFs. We launched one ETF on Wednesday, so that that'd be January 22nd. They'll be 37 by the time this episode comes out. Yeah, there you go. That's right. So that was the first one, the 100% protection. You know,

that headline, anytime you put Bitcoin and protection in the same headline, you're going to get media. And so we've had a ton of media exposure, a lot of articles written about that. But that's the first in a series. So on February 4th, we have a 90% protection and an 80% protection. And said in reverse, it's a floor product. You have a 10% floor, so 10% at risk or 20% at risk. And so what this suite does, the easiest way to think about it is you have Bitcoin exposure with a safety net. And you can decide how low to set that safety net. Do you want to lose 0% over the outcome period? 10% via a 90% protection level or 20% and the cap rates just go up from from there. So 100% protection, 11.65% cap rate.

So wait, let's pause there for a second. Yes, let's do it. All right. So 100% downside protection. Now, again, this is if you buy at inception and hold for a year. Is that how it works? So in other words, like, let's say that you want to, let's say in six months, you're like, oh, shit, I want to get out of this. And Bitcoin's down 50%. Are you still going to get 100% of your principal out intra period? Yeah.

If Bitcoin is down intra period, you'll still be right around that 100% mark. We can dive into the holdings of why that is. But yeah, we have 100% protection. You buy in at the beginning at $25 NAV. and you'll be able to get that outcome period performance. So you're saying that the NAV, or not the NAV, the actual price shouldn't drift so far below 25 at any point in time? Yeah, that's right.

So let's just walk through this scenario. Briefly, we can explain how we're constructing this. Yeah, this sounds like a free lunch. So anytime I hear that, you know, my antennas are up a little bit, so please. Yeah, and if you're in the X, X or Twitter sphere, a lot of people have asked that too. It says this sounds way too good to be true.

So hopefully some of those folks are listening here. But the way that we'll build this is largely through a portfolio of zero coupon treasury bonds. So we buy zero coupon. For those who don't know, those are discounted by the risk-free rate. So we're going to buy those at 96%. And they're going to accrete to 100. So we buy 96 because the risk-free rate today is about 4%. So about 96% of your portfolio is going to be.

in zero coupon bonds that are going to accrete to 100 at the end. So that gives me 4% to play with. So I'm going to take that 4% and I'm going to buy a call spread on Bitcoin. And I'm going to buy those options on a CBO Bitcoin ETF index. So I buy an at the money call. So if you're familiar with options and at the money call gives you the upside exposure to that Bitcoin reference price. And then the next layer, the last layer, I'm going to sell an out of the money call.

and I'm going to make that package equal to my 4% that I know I'm going to earn. So I've got a bunch of treasuries and a call spread. So what's the worst case scenario? Bitcoin goes down. Your call spread expires worthless. And I'm left with a bunch of treasuries that are worth 100% in my portfolio. That's it. There is no free lunch, which is why your upside cap is 11.65% right now.

But when it comes to capital protected growth, Bitcoin is, in fact, your best power source. It goes up faster and higher than the S&P 500 and more often. So you think about getting that cap rate, that's the best cap rate you'll find in principal protection land, and you can get all of that upside with no downside risk. And then last point, your downside's not tied to Bitcoin. It's tied to treasuries. If Bitcoin expires worthless, you've got a bunch of treasuries left over. I have questions about the other protections, but on the treasury side of things. So the obvious, the risk there is if rates fall and now you have a 2% zero coupon bond, you only have, 2% to play with, and that kind of changes your caps potentially? You have interest rate risk at the point in time when we strike the options. So we struck those options.

Those things could change where time as rates change. You got it. Yep. But you'll always be better than the risk-free rate. Right, because everyone is, yeah. Okay. So you're talking about the 90% protection in 80. So the way I see it, that is you're exposed to the first 10% of downside and then

you're protected. And then the other one, it's 20%. So what are the cap on the upside for those right now? Yeah. So I'll hold that as the payoff to the story here. So we do a floor product. These are not buffers. So there's a $60 billion buffer ETF space that's all tracking the equity markets.

And you get protection from the first set of loss. So if I give you a 10 buffer, you're protected from zero to minus 10. And then you're exposed. You could lose from minus 10 to minus 100. We've done the inverse of that. We've given you a floor. So if you have a 90% protection level, you have a 10% floor. So think of your safety net.

You could be exposed from zero to 10, but you're not going to lose anything more than that 10% before that 69 basis point expense ratio. And the cap on that we're seeing right now is about 30%. So you put 10% of your money at risk. You get 30% upside to the price of Bitcoin over the year. And then we can lower that net. Let's lower it to 20. So now the cap rate we're seeing is about 55.

So you can get 55% upside to Bitcoin with 20% at risk. So that's a way higher spread that you get in the equity products, obviously. Remarkably higher spread. That's right. Is this because there's more volatility there? So there's more juice in the options? There's more volatility. There's more upside volatility.

So we're selling off that call to help fund our protection level. And so because we're getting more from that call, we can give you more upside opportunity. So it's- I got to be honest. Those ceilings are way higher than I would have expected. Remarkably higher. That's right. That's right. And so, but it's at expiration, right? Like, that's, that's the level that matters.

Well, you're getting that cap rate over expiration, but you're going to achieve it along the way up, you know, so your delta or just call it upside capture might be 20 to 30% early on. And then you're going to get all of that cap over the outcome period. So, but if Bitcoin's up 30% after you buy, are you in the first three months, are you up 30% in the first three months? You're not. But me personally, if that happens, I'm in. Because now I know that. that Bitcoin has achieved that 30% and I can buy that ETF knowing that I'm going to earn that 30% over the next 11 months or so. And so

there's opportunity to capture that. That sounds like a free lunch. In that case, that would sound, and I can't say that, but it does feel a little bit like a free time. It's not obviously because if Bitcoin fell from there, why wouldn't I don't get the? No, because Ben, what he say is like if Bitcoin's up 30% in the first

three months. Okay. And the product's not up 30%. That means that you're four for losses out of 20% floor is now 50% lower or even more. Oh, okay. Yeah, exactly. I got you. Yeah, Bitcoin can fall 30% before your floor actually needs to kick in. Yeah.

Okay, that makes sense. But, all right, so this is just weird because you're saying that, well, you're not saying this, but I'm thinking this, that like, this isn't necessarily for people that want Bitcoin but don't want the Bitcoin downside. This could be for anyone. And if you're saying, hey, listen, with 100% protection, worst case, you don't make money, but best case, you make 11%. That's a lot better, potentially,

than keeping your money in cash, which is earning 4% and heading lower. That's exactly right. But do you really, do you really think that, I guess you do think that because you guys launched a product. Do you think that that's where the money is going to come from? Do you think it's going to come from conservative allocations, which again, holy moly, this is just like a,

this is like sort of backwards, but it makes sense. I know. I know. Couldn't it be like a high yield exposure or something maybe, especially like the 11% one, you could say like, well, I'm getting six or seven percent in high yield right now, couldn't it come from somewhere like that as well? This opens up the portfolio, which is why I say that these ETFs literally can be for

anybody. If you look at, let's say, spot Bitcoin ETP land where some of the largest asset managers out there who are telling you to put 3 to 5% in Bitcoin, but they want you to sell Mag 7 exposure to do it, well, why would you sell Mag 7 a growth asset that's giving you a high upside opportunity, maybe a little volatile? that's about the best like for like substitution. You don't have to do that anymore. You can sell out of your cash.

You can sell out of your bonds. You can sell your equities and just move into the protected version. Choose that version that helps you sleep best at night. I want to put 0% at risk, 10%, 20%, and get all of that upside growth. If you want to increase your portfolio growth potential, you know, if you're moving your cash in and you're getting two or three times the risk-free rate, that's a phenomenal way to,

increase upside opportunity without taking on any downside risk, or maybe you're pairing it with some spot Bitcoin ETPs and now you can cut off your tail risk, but not cut off your upside. There's a lot of things you could do. Is there risk that this breaks that like what you're trying to deliver for whatever reason, could that not pan out? Yeah, there's no, there's no risk that I can think of as far as breakage goes. I've built probably a couple hundred of these types of products, I was pretty instrumental in the development of the defined outcome space in 2017. And there's hundreds of those in the market. We build these somewhat similarly instead of those, you might get in the weeds, but instead of a zero strike call on an equity option,

we hold treasuries here. And so like the risk, if the lights go off on Bitcoin, you're left with treasuries. That is the risk of the protection. You've got trade. It really is a great time to be an investor, man, this sounds essentially, and the risk of sounding like, like I'm fawning, it sounds like such a great idea. So like, all right, so the risk is what? You don't make money? Like, okay. That's not that big of a risk, but the potential outcome is for up to 11% in change. Is that what you said? That's if you buy the 100% protected product, yeah, or you put 10% that risk 20. Yeah, whatever. This is like, I'm thinking like this is, this is not an investment in Bitcoin. This is an investment in like, I can get up to 11% with the downside of zero.

This is using Bitcoin as a power source for your portfolio in a way that is measured. Well, yeah, you talk about Saylor. I mean, yeah, he's basically building and using the converts market in order to buy Bitcoin. The convertible bond price track, if I could show you a picture, looks similar to a payoff profile of an option strategy. I was thinking that to you. I've seen that convertible graph before. like my CFA days or whatever. Yeah, for sure. It shows the floor and that is very interesting. So the other thing I want to hear you talk about is the Bitcoin options market, because this is

obviously relatively new. Would you expect over time as this matures for the options premiums to change and maybe it comes down a little bit? Or do you think because this is such a volatile asset and it trades 24-7, these options are always going to have something of a premium to them? Yeah, there's a lot to unpack on that one. As far as options go, you know, Calamos is a risk manager. We've been doing this for nearly 50 years. And so when you don't stay around for that long in the risk management game unless one, you know what you're doing. And then two, you innovate with security. And so the same is true for Bitcoin. When we build risk management and innovate, we have to do it in a way that works. I think about, like maybe it's an old version of AI where

you ask it to draw a picture of, you know, Ben, here, I'm looking at you. And it comes back looking like a cat. It's like, oh, that was way off unless people think you look like a cat. I don't know. But so you think about how big, how AI has just evolved and is getting better and better, you can't really do that with financial services products because it can't break. Like a lot of times, you're dealing with people's life savings. I'm talking about putting your safe money and tying it to Bitcoin now. And so you have to build things in a way that works. So that's why you see a lot of outcome-based products built on really liquid underlines like the S&P or NASDAQ or Russell, maybe international, you're starting to get close to the edge there. Bitcoin, believe

it or not, is very liquid. It's a $1.9 trillion asset just past silver, nearly as liquid as invidia from a market cap perspective. Not quite where gold is, $18 trillion. But you run that into the ETF space and there's $2 to $5 billion trading every day through those spot Bitcoin ETPs. So where does that take us? Usually after the spot Bitcoin ETPs come out, you know, those liquid ETFs, you get options. And so we were tracking that, you know, over the last nine, ten months. You've got options looking to come out. The SEC held up their hands and they said, hold on, we want to slow roll this. We don't want these options out right away. We want to watch the Bitcoin marketplace evolve more. You know, finally the SEC approved those options, but they did

so with position limits. And then the CFTC came out and they said, well, we want to make sure we don't have a say here. They finally agreed. We got those options out. And so what we've done, is, you know, working with Cebo, Sebo has built an index that tracks the price of Spot Bitcoin ETPs. And that's the options market that we're using. So the market makers can all hedge themselves through the liquidity of the Spot Bitcoin ETP marketplace. And we're able to use flex options on that index, which is treated as an equity index. So now we can create a really liquid environment. We came out at $25. We opened in cash. in order to give people an opportunity to buy in at the beginning.

So I'll just touch on that for 10 seconds. I know I'm getting long in the tooth here. So if you look at all the defined outcome funds in the market, you would strike a cap rate, but then the market could move overnight, and then you buy in and get close to that protection level. Well, for Bitcoin, like you said, it trades 24 hours a day. So what if Bitcoin moves overnight, 5, 10%, which it has before, we want people to be able to buy in and get the protection. level that we're stating. So on the 22nd, we opened at $25. We're going to do the same

thing on the fourth. It allows you to buy in all day, right around $25, and get the exact protection level you're looking for. And then we strike the cap at the end of the day. So just to wrap all that up. So sorry, that's just for the first day of trading for these vehicles. The first day of trading opens at $25, right, to give people an opportunity to buy in. That's right. Yeah. So that's a brand new thing for the outcome-based space. And it worked phenomenally. We saw a lot of people appreciate that opportunity to get the protection level. The product was saying they're going to deliver. Do you envision most people to buy these on that first day? Or you think there's going to be a lot of turnover in these strategies as the

price of Bitcoin moves? Yeah, I'll speak to the first part of that question. We've been in the market three days. I'd say about 60, 70 percent of the money has come in on day one. I think more money will keep coming in. We're at about 2,503 today. So now if you bought in, you'd get a 99.8% protection level instead of 100, so 20 basis point difference there. What we've seen historically is it's about 50-50. Some people buy in at the beginning. They want that outcome period performance. They want that certainty. Some people buy in along the way. Michael, you mentioned if Bitcoin's up 30%, you see a flood of money coming in. So we see people buying and selling all along the way. And it's pretty fun to watch actually. So, Matt, on this show about a month ago, I talked about how

I've ridden Bitcoin since, I don't know, I think I first bought it when it was like $4,000. And I bought more along the way. And I've sat through many a crash, two or three, two or three really big ones. And so when it finally got to $100,000, I sold half of my Bitcoin position. I said, you know what? I'm taking some money off the table. You sold half? I didn't know it was half. Oh, man, paper hands over there. Yes. But I'm looking at, like, let's say I still wanted a little bit of exposure. I look at that 90% protection. It gives me 10% downside and 30 whatever percent upside. If I wanted to tow back in the water there, that's not a bad way to do it either because you have the greater upside. I wish that you had had half of that still. You could put it in the 90 or the 80% protection. Like, who wouldn't want 50% upside and you got 20% of that at risk? That's a great way to protect the growth that you've earned over the last. year and good good for you for a hoddling for that long that's the traditional finance guy trying

to use as a tradfai guy i can't say that ever exactly um didn't come out well for me either i'm i'm curious how the conversations have evolved with both your equity products and then how it will evolve with this one because you said that a lot of people are using it to equitize their cash or fixed income or whatever is that how you envisioned these products or are you kind of surprised at the way that people are using them yeah i'll tell you on february 4th you know, which one is more successful. So February, sorry, February 4th is when your 90 and 80% protection are coming out. That's right. That's right. Yeah, so we're seeing people lining up for that 80.

We've seen a lot of movement into the 100. It's a little counterintuitive. You know, we talked about it here. The idea of tying your safe money to Bitcoin is a very novel concept. It sounds funny saying it, but it is true. People are like, oh, what's a use case in Bitcoin? Well, here's one use case. Yeah. Oh, absolutely. Absolutely. It is a, in fact, a wonderful power source if you want protection and getting upside because you get that strong upside cap. Just thinking about me personally, I've got a school bill coming in probably nine, ten months, and this is a great way to try to earn 11.5%. I see the wheels turning in Ben's head. He's going to change his profile picture of the laser eyes. It's coming.

I don't mean to be laser eyes if you're hedging the downside in Bitcoin. Matt, we spoke about this earlier, but I want to circle back because I don't know that I understood it clearly. talk about, I know we're not giving tax advice here, but talk about the tax implications. So on date, is it day 366 this thing matures? And so one on the taxes and then two, does this product just continue to roll if you don't want to take your money out? Does it do the same thing at day 366? So fire away.

Yeah, let's say I buy the 90% protection on February 4th. What happens on February 4th, 2026 or whenever it's or February 3rd, whatever it is? Yeah, so the ETF will stay open. you know, there's ETFs that are out for a duration, they close like a bullet share. This is not that. This is a, this ETF stays open. The options will simply roll year after year. So in one year, the next February 4th, actually we're going to expire January 31st of next year, every year January 31st. And so those options will just roll. You'll get a brand new protection level, a brand new upside cap, and a new outcome period. So that's how the products work. Comparing to

an equity product, the taxes are a little bit different, so I can explain that now. On the S&P 500, all of that growth is tax deferred. You know, there's no ordinary income being kicked out. There's no bonds in the portfolio. But contrast that to the way we do on Bitcoin, we hold treasuries. Again, because of the safety of treasuries relative to maybe if Bitcoin's lights go off, I don't think that'll happen. But you're holding treasuries. And then because of diversification, it's in the weeds comment, but Bitcoin is considered a single asset. So in order to meet registered investment company requirements, we have to diversify through treasuries. So all that said, we own, let's say we own 96% in treasuries. You're going to earn 4% your risk-free

rate. We can offset that against our expense ratio. So you're going to get the upside of Bitcoin. That growth is going to be tax deferred. We do not anticipate distributing any of those gains out, but then you might have about a 3% distribution from the income that you'll earn from treasuries. So you look at the 80% product, for example, if you earn 50%, you know, 47% of that is going to be tax deferred and you might get a little bit of a distribution from the ordinary income. So I'm back to the option stuff, which I think is fascinating. I guess one of the things that makes you confident about the options market, even though it's brand new, basically, is the fact that these ETF providers are going to be.

to be providing liquidity? Is that fair to say? Yeah, the market making community. So we have some of the top market makers in the world, you know, very names that you could think of off the top of your head are all making markets in these products. It was an exercise we went through over the last six to nine months to make sure everybody was confident in doing it. And we have a proofcase. We've been in the market a few days. It's gone phenomenally. It reminds me of when we built out the outcome-based space in 2017. It was a similar exercise. The S&P 500 was a very liquid complex, but there were no flex options trading in ETFs at the time. And so we built these products on flex options, and that ecosystem has grown into a $60 billion space.

The products launched seamlessly because of those market makers who are able to transact in the ETFs and hedge themselves from the underlying. If you take it even broader, think about the first fixed income ETFs that launched, people didn't know where that liquidity would come from. And in fact, the ETFs are now driving liquidity into the underlying fixed income instruments. So very similar here. And it's working phenomenally. Matt, when do options start trading on Trump coin? Oh, boy.

I have a question for you. Yeah. So let's say you're in the 50% protection and you have the 50 whatever percent upside. And in the first three months of the year, Bitcoin knocks out of the park. You hit your goal. Is there ever a case where it's going to make sense to trade from one fund to the next or to like lock in gains? Is that ever a possibility here?

Yeah, absolutely. You're not going to hit your cap rate. Let's say the cap's 50. You're not going to hit the 50 until the last day of the outcome period. It's like the opposite of time decay. Yes, exactly. You're just accreting that. So I was looking at CPSM, which is our May, S&P, 500.

series. There's about 90 days left in the outcome period. The S&P 500 is up 23% to date over that period. But the ETF has about one and a half percent of value left. And so I actually think that's a good trade for somebody because you got 90 days left. You're going to make 150 basis points over that 90 days as long as the S&P doesn't fall 20%. So there's some really interesting intraperiod opportunities that we're seeing. What I like on, you know, playing, the 100% protection products. Let's say you buy a January series. If the market's down, if the S&P or Bitcoin is down, you've avoided that loss. And so you could move into the next month. If we launch one in February or March, you've avoided all that loss. And now you can

reset your starting point and capture a rebound if it happens. So there's a lot of pretty cool opportunities interperiod. But I'd say that's level 201. And we could dive into that. you got to know you're you have to understand how these things work and yeah exactly exactly and you can go to our website does calamus uh have people that work with advisors on behalf of their clients or if people want to aren't exactly sure where this fits or or different you know whatever like yeah absolutely yeah we talked to them all day long um yeah i was on a hour long call with an advisor before jumping on with you that's our that's our bread and butter you know we have 40 50 person uh you You know, Portfolio Specialist Team.

That's all they do all day long is talk to advisors. You have a portfolio strategy group who's running models for people back testing those. One advisor is sending us his model. He wants to add Bitcoin. MicroStrat converts. He's like, can you model this out for me? So we're working on that right now as well. But yeah, that's what we do all day long.

And, you know, we've got trade ideas. Well, we'll send an email out to people who want to know like when there's a good idea like that CPSM trade or if, like you said, coins up 30 and you might want to get in. We'll give people those ideas if they're willing to hear from us. Very cool. All right. So that's calamos.com. Yeah, calimmos.com. You can see all of the pricing that we have for the ETFs. And I'm not saying pricing as far as expense ratio, but where those are trading, anytime the market's open, you can know what your upside is, your protection level, and how many days are left. So you understand what the ceiling is or the cap or the floor or whatever it is based on where the price is. Exactly. Yeah, exactly.

I mean, look at how many options-based strategies are in the market. There's put spread collars. There's hedged equity strategies. These are the only types of products that can tell you what the future looks like. We're telling you exactly where you're buying in at. We know how long your options life is. And so we have the ability to tell you where you'll land over the next one year or so. So a really cool opportunity to get Bitcoin in a way that's measured and understandable.

All right. Good stuff, Matt. Appreciate the time. Thank you. Hey, if you would like to learn more, Kalmosk.com, thanks to Matt for joining, as always, and email us, Animal Spirits at the compoundnews.com.