GraniteShares Launches Tesla-Focused Income ETF

GraniteShares debuted a new income-focused ETF strategy Wednesday, launching the GraniteShares YieldBOOST TSLA ETF (TSYY), the first in a planned suite of 20 funds designed to generate income through options trading.

According to GraniteShares CEO Will Rhind, the launch aims to meet growing investor demand for alternative income strategies amid expectations of falling interest rates, with the fund representing a new approach to selling put options on leveraged Tesla ETFs rather than the underlying stock itself to capture higher premiums from increased implied volatility.

“It's unique in that it uses options that are based on leveraged ETFs… that's never been done before,” Rhind told etf.com in an interview.

The strategy uses leveraged ETF options because they typically command higher prices than regular stock options, Rhind said, adding that this allows the fund to sell put options at strike prices below the current market price while still generating income.

“It's going to be a replacement for fixed income,” he said, noting investors are increasingly turning to options-based strategies for yield generation.

Navigating Market Complexity

The fund differs from existing options-based income ETFs by providing more downside buffer through its “out-of-the-money” options strategy, according to Rhind. However, the fund’s prospectus notes several risks, including potential challenges around option expiration and liquidity during volatile markets.

To address these challenges, Rhind said the fund will focus on highly liquid options contracts, with the portfolio management team working alongside brokers to ensure adequate liquidity and pricing.

The fund carries an expense ratio of 0.99%, according to Rhind, matching GraniteShares’ existing single-stock ETF lineup.

While TSYY uses options on leveraged ETFs, Rhind emphasized it is not itself a leveraged product.

GraniteShares chose Tesla as its first underlying exposure due to recent market performance and increased attention on the stock related to Elon Musk’s association with the incoming Trump administration, according to Rhind. 

The timing of future launches in the YieldBOOST suite will depend on market conditions and operational factors like securing seed capital and market makers, Rhind said.

GraniteShares sees the new suite as a natural extension of its existing business, according to Rhind. The firm already offers the GraniteShares HIPS U.S. High Income ETF (HIPS), an ETF focused on pass-through securities yielding over 10% annually, he said, demonstrating its previous work in alternative income strategies.