- Roundhill launches MSTW ETF offering weekly payouts tied to MicroStrategy stock performance.
- The new fund uses synthetic derivatives and leverage to aim for higher returns than MSTR.
- Investors face increased risks, including greater potential losses and illiquidity concerns.
- MSTW is an actively managed fund, not a passive tracker.
- Social media responses have been mostly positive, with launch expected soon.
The financial firm Roundhill is introducing the MSTW ETF, designed to provide investors with weekly payouts linked to MicroStrategy (MSTR) stock performance. This new fund targets retail investors who seek more frequent returns and uses financial tools to try to boost payouts beyond what MSTR offers in an average week.
According to official filings, MSTW will use leverage and synthetic derivatives, such as swap agreements, to seek returns 20% higher than MSTR’s weekly price change. This means that investors in MSTW could gain more than standard MSTR shareholders during positive weeks. However, these methods also increase risk. For every 1% that MicroStrategy shares fall in a week, MSTW investors may lose at least 1.2%, with losses further increased by fund expenses and trading costs.
Roundhill’s regulatory filing with the U.S. Securities and Exchange Commission (SEC) confirms that the ETF will use derivative contracts rather than holding MSTR shares directly. These contracts will expose investors to additional risks, including credit risk, counterparty risk, and potential problems with valuing the contracts. The liquidity of swap agreements may be much lower than MSTR stock itself, which could make it difficult or impossible to quickly buy or sell fund positions during market stress. Roundhill’s documents also warn that during such times, “it may be difficult or impossible to buy or sell a position. This may also make its positions more difficult to liquidate, and increase the losses incurred while trying to do so.”
The fund will be actively managed, with decisions made by the Adviser or Sub-Adviser, rather than simply tracking MSTR’s price performance. This approach can result in returns that are significantly different from simply owning MicroStrategy stock.
Despite these risks, many users on social media have reacted positively to the news of MSTW, with several community members and accounts sharing the press release and updates on the pending launch. The MSTW ETF was previously expected to go live in May, and investors are still waiting for its official debut.
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