The world of exchange-traded funds (ETFs) is evolving rapidly, with innovative strategies emerging to meet the growing demand for income generation and sector-specific exposure. REX Financial (“REX”), a pioneer in alternative-strategy ETFs, has launched the REX Crypto Equity Premium Income ETF (Nasdaq: CEPI)—a new financial product designed to offer investors targeted access to leading U.S. crypto-related companies while generating enhanced monthly income through a covered call strategy.
This latest offering builds on REX’s proven track record in developing option-based income solutions, adding a forward-looking dimension by tapping into the dynamic cryptocurrency ecosystem.
What Is the REX Crypto Equity Premium Income ETF (CEPI)?
CEPI is engineered to provide investors with exposure to the BITA Crypto Assets & Digital Payments Index, which tracks the performance of the top 25 U.S.-listed companies actively involved in crypto mining, blockchain development, digital payments, trading platforms, and custody solutions. By focusing on established players in this transformative space, CEPI offers a structured way to participate in the long-term growth of the digital asset economy.
What sets CEPI apart is its out-of-the-money covered call strategy. The fund writes call options on individual stocks within the index—options with strike prices above current market levels. This approach generates premium income, which contributes to CEPI’s monthly distributions, while still allowing room for capital appreciation if stock prices rise moderately.
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How Does the Covered Call Strategy Work?
A covered call involves owning shares of a stock and selling call options against them. If the stock price remains below the option’s strike price by expiration, the option expires worthless, and the seller keeps both the shares and the premium. This premium enhances overall returns, especially in sideways or moderately rising markets.
By using out-of-the-money calls, CEPI aims to balance two key objectives:
- Income generation: Regular option premiums boost monthly distributions.
- Capital appreciation potential: Since strike prices are set above current levels, investors can still benefit from moderate upside.
This strategy is particularly well-suited to the volatile yet high-potential nature of crypto-related equities, where price swings create recurring opportunities to collect option premiums.
Building on Proven Success: REX’s Income ETF Lineup
CEPI joins two other successful funds in REX’s covered call series:
- FANG & Innovation Equity Premium Income ETF (FEPI)
- REX AI Equity Premium Income ETF (AIPI)
Together, FEPI and AIPI have amassed over $500 million in assets under management since their launches. As of November 25, 2024, they delivered annualized distribution rates of 25.2% and 34.8%, respectively. While past performance doesn't guarantee future results, these figures highlight investor appetite for structured income solutions in high-growth sectors.
Although SEC 30-day yields were slightly negative (-0.09% for FEPI and -0.18% for AIPI as of October 31, 2024), it's important to note that these metrics exclude option income—the primary driver of CEPI’s yield. Instead, CEPI’s value proposition lies in its total return potential through a combination of capital gains and distribution income.
Core Keywords and Market Positioning
Key themes embedded throughout CEPI’s design include:
- Covered call ETF
- Crypto equity exposure
- Monthly income strategy
- Out-of-the-money options
- BITA Crypto Index
- Passive income investing
- Volatility harvesting
- Digital payments sector
These keywords reflect both investor search intent and the strategic positioning of CEPI as a hybrid instrument—part growth play, part income generator—within a volatile but maturing market segment.
Addressing Key Investor Questions
Q: How does CEPI generate monthly income?
A: CEPI generates income by selling out-of-the-money call options on stocks within the BITA Crypto Assets & Digital Payments Index. The premiums collected from these options are distributed to shareholders monthly.
Q: Is my principal protected with CEPI?
A: No investment is without risk. CEPI is subject to market fluctuations, derivatives risk, and potential loss of principal. Its use of options can limit upside gains during strong rallies.
Q: What types of companies are included in the index?
A: The index includes U.S.-listed firms engaged in crypto mining, blockchain infrastructure, digital wallets, crypto exchanges, and fintech payment innovation.
Q: Can distributions consist of return of capital?
A: Yes. Current distributions may be classified as return of capital, which reduces the fund’s net asset value over time. Investors should review the latest 19a-1 notices for full details.
Q: How often is the underlying index rebalanced?
A: The BITA Crypto Assets & Digital Payments Index is reconstituted quarterly and rebalanced monthly, ensuring it remains responsive to shifting market dynamics.
Q: What are the main risks of investing in CEPI?
A: Key risks include industry concentration (heavy tech/crypto exposure), liquidity constraints, derivatives usage, regulatory uncertainty around crypto assets, and volatility in underlying stock prices.
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Strategic Advantages in a High-Volatility Environment
Cryptocurrency-related equities are inherently volatile—driven by technological shifts, regulatory developments, macroeconomic trends, and speculative sentiment. While this volatility poses risks, it also creates opportunities for income-focused strategies like covered calls.
High volatility typically increases option premiums. By systematically harvesting these premiums, CEPI aims to turn market turbulence into a source of consistent income—a concept known as volatility harvesting.
Moreover, because CEPI focuses on established, publicly traded companies rather than direct crypto holdings, it avoids some of the custody and regulatory challenges associated with spot Bitcoin or Ethereum ETFs. This makes it a more accessible option for traditional investors seeking indirect exposure to the digital asset revolution.
Forward-Looking Vision from REX Leadership
Greg King, CEO of REX Financial, emphasized the strategic intent behind CEPI:
“Crypto is transforming financial ecosystems and creating unique investment opportunities. With CEPI, we’re applying our targeted covered call strategy to the sector’s most disruptive companies, creating new opportunities for income generation. We remain committed to building first-of-their-kind tools to help traders and investors harness opportunities in the market.”
This vision aligns with broader trends in ETF innovation—moving beyond simple passive indexing toward active income engineering and thematic exposure.
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Final Thoughts: A New Chapter in Income Investing
The launch of CEPI marks a significant step in bridging traditional finance with the digital economy. It offers a disciplined way to gain diversified exposure to crypto innovators while generating tangible monthly income—an appealing combination for yield-seeking investors navigating low-interest-rate environments.
While not without risks, CEPI represents a thoughtfully constructed product that leverages volatility rather than fearing it. For investors comfortable with sector concentration and derivatives-based strategies, CEPI could serve as a compelling component of a growth-and-income portfolio.
As regulatory clarity improves and institutional adoption grows, products like CEPI may become increasingly central to how investors engage with one of the most transformative technological shifts of our time.