David Nicholas - X Funds

Описание: David Nicholas, founder of Nicholas X Funds and a financial advisor with nearly 20 years of experience running a private wealth practice in Atlanta, joins the show to break down how he's building one of the more ambitious ETF suites in the smaller issuer space. David walks through the origin story of X Funds, which started during COVID when he saw an opportunity to recreate insurance company balance sheets in a liquid ETF wrapper. His first fund FIAX was designed as a liquid alternative to fixed annuities, pairing a treasury underlay with short spreads on HYG to harvest junk bond yield, then using that income to buy long index call options for equity upside exposure. The fund attracted institutional investors including foreign governments and became the launchpad for everything that followed.


From there, David built GIAX and then BLOX, a crypto fund that has now grown to just under 250 million in assets. The firm has since launched four new thematic funds — silver (SLVX), gold (GLDN), defense (Weapon), and nuclear — with two more Bitcoin-based products in the pipeline, an overnight fund and a Bitcoin tail hedge fund. The common architecture across the entire suite pairs roughly 50 percent commodity or core asset exposure with 50 percent equity positions in companies that benefit from that commodity, all layered with an active options overlay. In SLVX, that means silver spot exposure through ETFs like SLV and PSLV alongside miners like First Majestic, Pan American, and Wheaton. In Weapon, the commodity sleeve is rare earth materials used in defense manufacturing, balanced with traditional defense companies.


David goes deep on why he built the options strategy around short put spreads rather than traditional covered calls. His core argument is that covered call strategies almost never beat their underlying in rising markets because the short call caps your upside. With put spreads on the equity side, the fund collects premium while preserving full upside participation. On the commodity ETF side, the team sells call spreads but also buys long calls above the spread to recapture gains on sharp moves higher. None of the funds track an index — they are all actively managed with the ability to switch between calls and puts, add protective hedges, or take them off at any time.


The conversation also tackles NAV decline head on. David distinguishes between NAV decline caused by underlying positions dropping versus decline caused by over-distribution, and uses BLOX as a case study. The fund generates roughly 50 percent yield from options but only distributes 36 percent, targeting an 80 percent success rate on trades. Bitcoin is down 20 to 30 percent since inception yet BLOX has remained roughly flat, meaning the fund is outperforming its underlying without the distribution dragging the NAV. He could declare a higher yield like some competitor crypto funds but considers that irresponsible if the options income doesn't support it.


David also gets real about the business side of scaling a smaller issuer — reinvesting essentially all revenue from the first three funds into launching six new products, navigating the compliance minefield of ETF marketing, and the leadership transition from having his fingerprints on everything to hiring specialized talent who can push the firm beyond his own ceiling. For advisors, he frames the funds through a picks and shovels lens: rather than just buying the commodity, own the entire ecosystem around it with an income-generating overlay on top.