ETF Education Report: BITWISE MSTR OPTION INCOME STRATEGY ETF (IMST)

What this ETF is trying to do

The BITWISE MSTR OPTION INCOME STRATEGY ETF (IMST) is an exchange-traded fund listed on the NYSE. While the specific investment goals are not detailed in the data, the name suggests it uses an option strategy to generate income.

What the numbers show

It is important to understand the difference between price return and total return. Price return only tracks how much the share price changes. Total return includes both price changes and the distributions (cash payments) made to investors.

According to the data:

• Year-to-Date (YTD): The YTD price return is approximately -42.70%. However, the YTD total return is -30.34%.

• One-Year Performance: The one-year price return is approximately -84.91%. When including distributions, the one-year total return is approximately -70.21%.

• Price Change: The current price is $7.23. An estimated price from roughly one year ago was approximately $47.92.

To visualize this, imagine an investor had $10,000 in this ETF one year ago. Based on the one-year price return of -84.91%, that $10,000 would have dropped to roughly $1,509 based on share price alone, before accounting for any cash distributions received.

Income and distribution explanation

This ETF has a very high distribution yield of approximately 209.43%. This means the fund has paid out a large amount of cash relative to its share price. These distributions usually happen monthly, with Friday being the most common day for payouts. Over the last 12 months, there were 11 distributions totaling approximately $15.14 per share.

It is vital to remember that a high distribution yield does not mean an investor earned that percentage as a total return. While these payments provide cash income, they do not guarantee that your original investment (your principal) will stay the same.

NAV erosion explanation

This ETF has a severe erosion-risk flag. The data shows an erosion score of 10, which is labeled as "Severe price erosion."

"NAV erosion" refers to a situation where the value of the underlying assets in the fund decreases significantly. In this case, there has been a major share-price decline. When an ETF's share price falls from a high level (like the estimated $47.92) to a much lower level (like $7.23), it can destroy the principal investment. Income investors often prefer ETFs where the price stays steady or goes up slightly, because a collapsing share price can quickly outweigh the benefits of the cash income received.

Pros

• The fund provides frequent cash distributions (usually monthly).

• It offers a very high distribution yield.

Cons

• There has been a significant share-price decline over the last year.

• The fund carries a severe erosion-risk flag.

• Total returns have been negative over the one-year period.

Beginner takeaway

High yields can be misleading. A very high distribution yield often exists alongside a declining share price. When the share price drops significantly, the total value of an investment can decrease even if you are receiving regular cash payments.