Behind the Ticker: The Nicholas X Funds

Behind the Ticker offers investors a chance to get under the hood of newer or more niche ETFs. Brad Roth, Managing Partner and CIO of Thor Financial Technologies, talks strategy and the human side of investing and ETFs with the individuals bringing these funds to market. 

In this episode, Roth talks with David Nicholas, Founder and President of Nicholas Wealth Management. The firm launched the Nicholas Fixed Income Alternative ETF (FIAX) in the post-COVID recovery period. They followed up with the Nicholas Global Equity and Income ETF (GIAX) and have since expanded with several thematic offerings that include the Nicholas Crypto Income ETF (BLOX), and the newly launched Nicholas Gold Income ETF (GLDN) and Nicholas Silver Income ETF (SLVX), with more funds on the way. 

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The Importance of Owning the Whole Ecosystem

David Nicholas joins the show to discuss his transition from running a private wealth management practice in Atlanta for nearly 20 years to building out a rapidly expanding suite of ETFs under the Nicholas X Funds brand. The conversation covers the origins of the firm, the common investment architecture across all of its products, the mechanics of the option overlay strategy that powers them, and the business realities of scaling an ETF issuer from scratch.

Nicholas explains that the genesis of X Funds came during COVID, rooted in his background working with insurance-based investment strategies. He observed that insurance companies typically hold portfolios consisting of 90 to 95 percent fixed income, then use a small portion of that interest income to purchase long call options for equity upside exposure. His first fund, FIAX, was designed to replicate that insurance company balance sheet approach in a liquid ETF wrapper, essentially creating a liquid alternative to a fixed annuity without the long lockup periods of five, eight, or ten year contracts. The fund attracted significant institutional interest, including allocations from foreign governments using it as part of their treasury allocation. From there, Nicholas launched GIAX as his second fund, followed by BLOX, a crypto-focused fund that has now grown to just under 250 million in assets. The firm has since launched four additional thematic funds covering silver, gold, defense, and nuclear, with two more Bitcoin-based funds in the pipeline — an overnight fund and a Bitcoin tail hedge fund — bringing the total from three to nine funds within a matter of weeks.

The common thread across the entire X Funds suite is a structure that pairs a core commodity or asset exposure with an equity sleeve of companies that benefit from that commodity, layered with an active options overlay. In BLOX, for example, 40 to 50 percent of the portfolio is allocated to Bitcoin and Ethereum, with the remainder in companies tied to blockchain and crypto. The silver fund, SLVX, holds roughly 50 percent in silver spot exposure through ETFs like SLV, SIVR, and PSLV, with the other 50 percent in silver ecosystem companies such as First Majestic, Pan American, Wheaton, and Fortuna. The gold fund, GLDN, mirrors this exact structure with gold substituted in. The defense fund, Weapon, is slightly different in that its commodity sleeve consists of rare earth materials used in defense manufacturing, balanced with traditional defense companies. The nuclear fund follows the same paired structure.

Nicholas goes deep on the options overlay, which he considers the engine of the entire suite. He draws a sharp distinction between his approach and traditional covered call income strategies. His primary concern with covered calls is that they cap upside in rising markets, meaning the fund rarely beats its underlying. Instead, X Funds predominantly uses short put spreads on equity positions where the team has high conviction. In a rising market, the put spreads generate premium income while allowing the fund to participate in the full upside of the equity positions. On the commodity ETF side of the portfolio, the team sells call spreads, which does cap some upside on the spot price, but they also buy long calls above the spread to recapture gains if the commodity makes a sharp move higher. The firm can also deploy protective puts or put spreads as hedges, and can switch between call and put strategies at any time. None of the X Funds track an index — they are all actively managed, with options strategy decisions driven by the trade desk and management team.

The conversation also covers FIAX's evolving strategy in detail. Nicholas explains that the fund has shifted from running frequent monthly opportunistic trades, which struggled to keep pace in the strong 2023 and 2024 markets, to longer-dated three to six month index call exposure. This change was partly driven by the experience of having options expire during the April 2025 tariff-driven selloff, where short-term timing risk proved costly. The fund now uses these longer-dated calls as core exposure while running a handful of smaller opportunistic sector trades — currently long XLU and XLF, short XLP — based on RSI and macro conviction, with each position sized at a half percent risk. Nicholas frames the math simply: treasuries yield around four percent, and the fund only needs roughly 30 basis points per month of additional return from the options overlay to generate seven and a half to eight percent total yield above the treasury base.

Nicholas addresses the question of NAV decline, a common concern with income-generating ETFs, head on. He distinguishes between NAV decline caused by the underlying positions going down versus NAV decline caused by over-distribution. He uses BLOX as an example: the fund generates approximately 50 percent yield from its options positions but distributes only 36 percent, targeting an 80 percent success rate on options trades to support that distribution level. He notes that Bitcoin is down roughly 20 to 30 percent since BLOX's inception, yet the fund has remained roughly flat over that period, demonstrating that the fund is outperforming its underlying and not distributing at a level that drags the NAV. He could declare a 40 or 50 percent distribution like some competitor crypto funds, but he considers that irresponsible if the options yield doesn't support it sustainably.

For advisors considering how to use these funds, Nicholas frames them through the picks and shovels analogy. Rather than just buying the commodity, an advisor can gain exposure to the entire ecosystem around that commodity — the miners, royalty companies, construction companies, and service providers — alongside the spot price, with the options overlay generating income on top. He acknowledges that some advisors are still slow to adopt commodities in client portfolios, but argues that for those who do allocate to gold, silver, or Bitcoin, owning the full sector rather than just the raw commodity is a better approach.

On the business side, Nicholas is transparent about the challenges of scaling a smaller ETF issuer. He explains that the firm reinvested essentially all of its revenue from the first three funds into launching the six new funds, describing it as a bet on the business with conviction rather than recklessness. He identifies marketing as the single biggest challenge, noting that compliance restrictions make it extremely difficult to promote an ETF, and that even funds with the best performance go unnoticed if nobody knows about them. He also discusses the leadership transition from being a hands-on founder with fingerprints on every aspect of the first three funds to hiring specialized talent who can push the business beyond his own ceiling.

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Disclaimer: The market insights, projections, and investment strategies expressed in this article are solely those of the contributor and do not necessarily reflect the views or opinions of ETF.com This content is provided for informational purposes and does not constitute financial, investment, or legal advice.