Through the Program, a portion of the Company's Bitcoin holdings are held in Kraken's qualified custody solution and used as collateral for a derivatives strategy managed by Bitwise Asset Management ("Bitwise") in a separately managed account ("SMA").

Under the Program, Nakamoto and Bitwise, in its capacity as SMA manager, actively manage a portfolio of listed and over-the-counter Bitcoin-linked derivatives. The Program is organized around two complementary sleeves:

  • Income sleeve: covered calls and call spreads. The Company writes covered calls and call spreads against a defined portion of its Bitcoin holdings to convert the implied volatility embedded in Bitcoin options markets into recurring premium income. Position sizing, strike selection, and tenor are governed by the Company's risk framework.
  • Hedging sleeve: protective puts and put spreads. The Company purchases protective puts and put spreads against a defined portion of its Bitcoin holdings to reduce the Company's mark-to-market exposure to adverse Bitcoin price movements over defined time horizons. Where appropriate, premium outlays associated with this sleeve are partially funded by income generated from the income sleeve.