First Trust launches Bitcoin Strategy ETFs as Target Income ETFs

First Trust Advisors has launched two new bitcoin strategy ETFs: the FT Vest Bitcoin Strategy Floor15 ETF – April (traded as BFAP) and the FT Vest Bitcoin Strategy & Target Income ETF (traded as DFII). The company is offering investors opportunities to take part in bitcoin’s growth while managing risks.

These funds are part of First Trust’s growing group of Target Outcome ETFs. These are ETFs designed to provide investors with a specific investment outcome over a predetermined period. These funds aim to balance the potential for growth with a level of protection against losses.

BFAP is designed to offer returns that match the price of a bitcoin index, but with protection against big losses. It puts a cap on how much return an investor can get but also limits losses to 15% over about a year.

The fund does not hold bitcoin directly. Instead, it invests in short-term U.S. Treasury securities, cash, and options tied to a bitcoin reference index. This strategy helps shape a predictable investment outcome.

The company currently uses the Cboe Bitcoin U.S. ETF Index but stated in the future it may use other indexes or bitcoin-related exchange-traded products. Investors who buy BFAP after it has already gone up may face more than 15% losses before the fund’s protective features kick in.

DFII, the second fund, aims to provide income while also gaining from bitcoin’s growth. The fund targets an annual income of 15% (before fees and expenses) over what one-month U.S. Treasury securities offer. It invests at least 80% of its assets in bitcoin-related or income-generating investments, again, without holding bitcoin directly.

DFII uses a mix of options to build its strategy. It buys call options to profit if bitcoin rises and sells put options to earn income if bitcoin falls. These options last for less than a year and are regularly updated to maintain exposure to bitcoin’s movements.

Read also: Bitwise projects US Bitcoin ETFs could reach $50B in 2025

Ryan Issakainen, Senior Vice President at First Trust, explained that while many investors are interested in bitcoin-linked ETFs, the risk of large losses has made some hesitant.

He believes BFAP will give those investors a way to benefit from bitcoin’s gains while reducing downside risk. He also highlighted DFII’s goal of using bitcoin’s high price swings to generate income by selling call options.

Jeff Chang, President of Vest, stated that BFAP offers a more controlled way to invest in bitcoin. It uses a defined risk and reward structure, helping investors better understand what to expect.

DFII is another step in making bitcoin investing clearer and more predictable, combining income generation with exposure to digital assets, Chang said.

Both funds are managed by Vest Financial LLC, the firm that created the “Target Outcome” investment approach. Portfolio managers Karan Sood and Trevor Lack lead the day-to-day strategy for both BFAP and DFII.

First Trust is a privately held U.S. financial company based in Wheaton, Illinois. It manages over $266 billion in assets and offers ETFs, mutual funds, and investment trusts. Through its Vest division, which manages over $46 billion, it simplifies complex investments with clear strategies. The company also provides asset management and advisory services.