UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number (811-23377)
Tidal ETF Trust
(Exact name of registrant as specified in charter)
234 West Florida Street, Suite 203
Milwaukee, Wisconsin 53204
(Address of principal executive offices) (Zip code)
Eric W. Falkeis
Tidal ETF Trust
234 West Florida Street, Suite 203
Milwaukee, Wisconsin 53204
(Name and address of agent for service)
(844) 986-7700
Registrant’s telephone number, including area code
Date of fiscal year end: April 30
Date of reporting period: October 31, 2024
Item 1. Reports to Stockholders.
ZEGA Buy and Hedge ETF Tailored Shareholder Report
semi-annual Shareholder Report October 31, 2024 ZEGA Buy and Hedge ETF ZEGA Buy and Hedge ETF Ticker: ZHDG (Listed on NYSE Arca, Inc.) |
This semi-annual shareholder report contains important information about the ZEGA Buy and Hedge ETF (the "Fund") for the period May 1, 2024 to October 31, 2024. You can find additional information about the Fund at www.zegaetfs.com. You can also request this information by contacting us at (833) 415-4006 or by contacting the Fund at ZEGA Buy and Hedge ETF c/o U.S. Bank Global Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701.
What were the Fund costs for the past six months?
(based on a hypothetical $10,000 investment)
Fund Name | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
|---|
ZEGA Buy and Hedge ETF | $51 | 0.96% |
Costs paid as a percentage of a $10,000 investment is an annualized figure.
Key Fund Statistics
(as of October 31, 2024)
| |
|---|
Fund Size (Thousands) | $27,445 |
Number of Holdings | 10 |
Portfolio Turnover | 18% |
Sector Breakdown
(% of total portfolio)
Sector/Security Type | % of Total Portfolio |
Purchased Options | 0.666 |
U.S. Treasury Securities | 0.185 |
Cash & Cash Equivalents | 0.149 |
Percentages are based on total net assets. Cash & Cash Equivalents represents short-term investments and other assets in excess of liabilities.
What did the Fund invest in?
(as of October 31, 2024)
Top Holdings | (% of net assets) |
|---|
SPDR S&P 500 ETF Put Option, Expiration: 12/19/2025; Exercise Price: $205.01 | 64.8 |
United States Treasury Note/Bond, 3.88%, 01/15/2026 | 4.7 |
United States Treasury Note/Bond, 3.00%, 07/15/2025 | 4.7 |
United States Treasury Note/Bond, 2.63%, 04/15/2025 | 4.6 |
United States Treasury Note/Bond, 0.75%, 11/15/2024 | 4.5 |
SPDR S&P 500 ETF Call Option, Expiration: 06/20/2025; Exercise Price: $500.00 | 0.6 |
SPDR S&P 500 ETF Call Option, Expiration: 09/19/2025; Exercise Price: $500.00 | 0.5 |
SPDR S&P 500 ETF Call Option, Expiration: 08/15/2025; Exercise Price: $500.00 | 0.4 |
SPDR S&P 500 ETF Call Option, Expiration: 03/21/2025; Exercise Price: $485.00 | 0.3 |
How has the Fund changed?
There were no material changes during the reporting period.
Changes in and Disagreements with Accountants
There were no changes in or disagreements with accountants.
Householding
Householding is an option available to certain investors of the Fund. Householding is a method of delivery, based on the preference of the individual investor, in which a single copy of certain shareholder documents can be delivered to investors who share the same address, even if their accounts are registered under different names. Householding for the Fund is available through certain broker-dealers. If you are interested in enrolling in householding and receiving a single copy of prospectuses and other shareholder documents, please contact your broker-dealer. If you are currently enrolled in householding and wish to change your householding status, please contact your broker-dealer.
For additional information about the Fund, including its prospectus, financial information, holdings and proxy voting information, visit www.zegaetfs.com.
ZEGA Buy and Hedge ETF Tailored Shareholder Report
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual reports.
Item 6. Investments.
| (a) | Schedule of Investments is included within the financial statements filed under Item 7 of this Form. |
Item 7. Financial Statements and Financial Highlights for Open-End Investment Companies.
(a)
Financial Statements
October 31, 2024 (Unaudited)
| Tidal ETF Trust | | |
| Zega Buy and Hedge ETF | | ZHDG | | NYSE Arca, Inc. |
ZEGA Buy and Hedge ETF
Table of Contents
| Schedule of Investments | ZEGA Buy and Hedge ETF |
October 31, 2024 (Unaudited)
PURCHASED OPTIONS - 66.6%(a)(b) | | Notional Amount | | | Contracts | | | Value | |
| Call Options - 64.8% | | | | | | | | | | | | |
| SPDR S&P 500 ETF, Expiration: 12/19/2025; Exercise Price: $205.01(c) | | $ | 27,408,448 | | | | 482 | | | $ | 17,793,235 | |
| | | | | | | | | | | | | |
| Put Options - 1.8% | | | | | | | | | | | | |
| SPDR S&P 500 ETF | | | | | | | | | | | | |
| Expiration: 03/21/2025; Exercise Price: $485.00 | | | 8,188,416 | | | | 144 | | | | 82,440 | |
| Expiration: 06/20/2025; Exercise Price: $500.00 | | | 8,188,416 | | | | 144 | | | | 152,208 | |
| Expiration: 08/15/2025; Exercise Price: $500.00 | | | 5,515,808 | | | | 97 | | | | 123,287 | |
| Expiration: 09/19/2025; Exercise Price: $500.00 | | | 5,515,808 | | | | 97 | | | | 134,442 | |
| TOTAL PURCHASED OPTIONS (Cost $15,009,179) | | | | | | | | | | | 18,285,612 | |
| | | | | | | | | | | | | |
| U.S. TREASURY SECURITIES - 18.5% | | | | | | | Par | | | | | |
| United States Treasury Note/Bond | | | | | | | | | | | | |
| 0.75%, 11/15/2024 | | | | | | $ | 1,227,000 | | | | 1,225,151 | |
| 2.63%, 04/15/2025 | | | | | | | 1,264,000 | | | | 1,254,067 | |
| 3.00%, 07/15/2025 | | | | | | | 1,300,000 | | | | 1,288,409 | |
| 3.88%, 01/15/2026 | | | | | | | 1,298,000 | | | | 1,292,321 | |
| TOTAL U.S. TREASURY SECURITIES (Cost $5,038,329) | | | | | | | | | | | 5,059,948 | |
| | | | | | | | | | | | | |
| SHORT-TERM INVESTMENTS - 0.8% | | | | | | | | | | | | |
| Money Market Funds - 0.8% | | | | | | Shares | | | | | |
| First American Government Obligations Fund - Class X, 4.78%(d) | | | | | | | 223,668 | | | | 223,668 | |
| TOTAL SHORT-TERM INVESTMENTS (Cost $223,668) | | | | | | | | | | | 223,668 | |
| | | | | | | | | | | | | |
TOTAL INVESTMENTS - 85.9% (Cost $20,271,176) | | | | | | | | | | | 23,569,228 | |
| Other Assets in Excess of Liabilities - 14.1% | | | | | | | | | | | 3,876,183 | |
| TOTAL NET ASSETS - 100.0% | | | | | | | | | | $ | 27,445,411 | |
Percentages are stated as a percent of net assets.
| (a) | 100 shares per contract. |
| (b) | Exchange-traded. |
| (c) | FLexible EXchange® Options. |
| (d) | The rate shown represents the 7-day annualized effective yield as of October 31, 2024. |
| The accompanying notes are an integral part of these financial statements. | 1 |
| Statement of Assets and Liabilities | ZEGA Buy and Hedge ETF |
October 31, 2024 (Unaudited)
| ASSETS: | | | |
| Investments, at value (Note 2) | | $ | 23,569,228 | |
| Deposit at broker for other investments | | | 3,867,889 | |
| Interest receivable | | | 32,901 | |
| Total assets | | | 27,470,018 | |
| | | | | |
LIABILITIES: | | | | |
| Payable to adviser (Note 4) | | | 23,723 | |
| Interest payable | | | 884 | |
| Total liabilities | | | 24,607 | |
| NET ASSETS | | $ | 27,445,411 | |
| | | | | |
NET ASSETS CONSISTS OF: | | | | |
| Paid-in capital | | $ | 39,382,608 | |
| Total accumulated losses | | | (11,937,197 | ) |
| Total net assets | | $ | 27,445,411 | |
| | | | | |
| Net assets | | $ | 27,445,411 | |
| Shares issued and outstanding(a) | | | 1,350,000 | |
| Net asset value per share | | $ | 20.33 | |
| | | | | |
| COST: | | | | |
| Investments, at cost | | $ | 20,271,176 | |
| (a) | Unlimited shares authorized without par value. |
| The accompanying notes are an integral part of these financial statements. | 2 |
| Statement of Operations (Unaudited) | ZEGA Buy and Hedge ETF |
October 31, 2024
| INVESTMENT INCOME: | | | |
| Interest income | | $ | 259,165 | |
| Total investment income | | | 259,165 | |
| | | | | |
EXPENSES: | | | | |
| Investment advisory fee (Note 4) | | | 160,255 | |
| Interest expense | | | 2,280 | |
| Total expenses | | | 162,535 | |
| NET INVESTMENT INCOME | | | 96,630 | |
| | | | | |
REALIZED AND UNREALIZED GAIN | | | | |
| Net realized gain from: | | | | |
| Investments | | | 917,757 | |
| Written option contracts expired or closed | | | 121,244 | |
| Net realized gain | | | 1,039,001 | |
| Net change in unrealized appreciation on: | | | | |
| Investments | | | 2,844,225 | |
| Written option contracts | | | (49,327 | ) |
| Net change in unrealized appreciation | | | 2,794,898 | |
| Net realized and unrealized gain | | | 3,833,899 | |
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 3,930,529 | |
| The accompanying notes are an integral part of these financial statements. | 3 |
| Statements of Changes in Net Assets | ZEGA Buy and Hedge ETF |
October 31, 2024
| | | Period ended October 31, 2024
(Unaudited) | | | Year ended April
30, 2024 | |
| OPERATIONS: | | | | | | | | |
| Net investment income | | $ | 96,630 | | | $ | 246,754 | |
| Net realized gain | | | 1,039,001 | | | | 5,070,075 | |
| Net change in unrealized appreciation/(depreciation) | | | 2,794,898 | | | | (7,292 | ) |
| Net increase in net assets from operations | | | 3,930,529 | | | | 5,309,537 | |
| | | | | | | | | |
DISTRIBUTIONS TO SHAREHOLDERS: | | | | | | | | |
| Distributions to shareholders | | | – | | | | (523,645 | ) |
| Return of capital | | | – | | | | (208,455 | ) |
| Total distributions to shareholders | | | – | | | | (732,100 | ) |
| | | | | | | | | |
CAPITAL TRANSACTIONS: | | | | | | | | |
| Subscriptions | | | 2,452,700 | | | | 440,112 | |
| Redemptions | | | (14,377,762 | ) | | | (24,970,335 | ) |
| Net decrease in net assets from capital transactions | | | (11,925,062 | ) | | | (24,530,223 | ) |
| | | | | | | | | |
NET DECREASE IN NET ASSETS | | | (7,994,533 | ) | | | (19,952,786 | ) |
| | | | | | | | | |
NET ASSETS: | | | | | | | | |
| Beginning of the period | | | 35,439,944 | | | | 55,392,730 | |
| End of the period | | $ | 27,445,411 | | | $ | 35,439,944 | |
| | | | | | | | | |
SHARES TRANSACTIONS | | | | | | | | |
| Subscriptions | | | 125,000 | | | | 25,000 | |
| Redemptions | | | (725,000 | ) | | | (1,425,000 | ) |
| Total decrease in shares outstanding | | | (600,000 | ) | | | (1,400,000 | ) |
| The accompanying notes are an integral part of these financial statements. | 4 |
| Financial Highlights | ZEGA Buy and Hedge ETF |
For a share outstanding throughout the periods presented
| | | Period | | Year ended April 30, | | |
| | | ended
October 31,
2024
(Unaudited) | | 2024 | | 2023 | | Period
ended April 30,
2022(a) |
| PER SHARE DATA: |
| |
| Net asset value, beginning of period | | $18.17 | | $16.54 | | $18.35 | | $20.00 |
| | | | | | | | | |
| INVESTMENT OPERATIONS: | | | | | | | | |
| Net investment income(b) | | 0.06 | | 0.09 | | 0.46 | | 0.34 |
| Net realized and unrealized gain (loss) on investments(c) | | 2.10 | | 1.81 | | (1.70) | | (1.71) |
| Total from investment operations | | 2.16 | | 1.90 | | (1.24) | | (1.37) |
| | | | | | | | | |
| LESS DISTRIBUTIONS FROM: | | | | | | | | |
| Net investment income | | – | | (0.19) | | (0.57) | | (0.28) |
| Return of capital | | – | | (0.08) | | – | | – |
| Total distributions | | – | | (0.27) | | (0.57) | | (0.28) |
| | | | | | | | | |
| Net asset value, end of period | | $20.33 | | $18.17 | | $16.54 | | $18.35 |
| | | | | | | | | |
| TOTAL RETURN(d) | | 11.86% | | 11.58% | | -6.67% | | -7.01% |
| | | | | | | | | |
| SUPPLEMENTAL DATA AND RATIOS: | | | | | | | | |
| Net assets, end of period (in thousands) | | $27,445 | | $35,440 | | $53,393 | | $116,985 |
| Ratio of expenses to average net assets(e) | | 0.96% | | 0.98% | | 0.95% | | 0.95% |
| Ratio of interest expense to average net assets(e) | | 0.01% | | 0.03% | | 0.00%(g) | | 0.00%(g) |
| Ratio of operational expenses to average net assets excluding interest expense(e) | | 0.95% | | 0.95% | | 0.95% | | 0.95% |
| Ratio of net investment income to average net assets(e)(h) | | 0.57% | | 0.50% | | 2.68% | | 2.09% |
| Portfolio turnover rate(d)(f) | | 18% | | 80% | | 214% | | 107% |
| (a) | Inception date of the Fund was July 6, 2021. |
| (b) | Net investment income per share has been calculated based on average shares outstanding during the period. |
| (c) | Realized and unrealized gains and losses per share in the caption are balancing amounts necessary to reconcile the change in net asset value per share for the periods, and may not reconcile with the aggregate gains and losses in the Statement of Operations due to share transactions for the period. |
| (d) | Not annualized for periods less than one year. |
| (e) | Annualized for periods less than one year. |
| (f) | Portfolio turnover rate excludes in-kind transactions. |
| (g) | Value does not round to 0.01% or (0.01)%, as applicable. |
| (h) | The net investment income ratio includes interest expense. |
| The accompanying notes are an integral part of these financial statements. | 5 |
| Notes to Financial Statements | ZEGA Buy and Hedge ETF |
October 31, 2024 (Unaudited)
The ZEGA Buy and Hedge ETF (the “Fund”) is a diversified series of shares of beneficial interest of Tidal ETF Trust (the “Trust”). The Fund commenced operations as a non-diversified series of the Trust; however, the Fund continuously operated as diversified for three years and as of July 5, 2024 is now classified as diversified. The Trust was organized as a Delaware statutory trust on June 4, 2018 and is registered with the Securities and Exchange Commission (the “SEC”) under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company and the offering of the Fund’s shares (“Shares”) is registered under the Securities Act of 1933, as amended. The Trust is governed by the Board of Trustees (the “Board”). Tidal Investments LLC (“Tidal Investments” or the “Adviser”), a Tidal Financial Group company, serves as investment adviser to the Fund and ZEGA Financial, LLC (the “Sub-Adviser”) serves as sub-adviser to the Fund. The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 “Financial Services—Investment Companies.” The Fund commenced operations on July 6, 2021.
The investment objective of the Fund is to seek long-term capital appreciation while mitigating overall market risk.
| NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES |
The following is a summary of significant accounting policies consistently followed by the Fund. These policies are in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
| A. | Security Valuation. Equity securities that are listed on a securities exchange, market or automated quotation system for which quotations are readily available (except for securities traded on the NASDAQ Stock Market, LLC (“NASDAQ”)), including securities traded over-the-counter, are valued at the last quoted sale price on the primary exchange or market (foreign or domestic) on which they are traded on the valuation date (or at approximately 4:00 p.m. EST if a security’s primary exchange is normally open at that time), or, if there is no such reported sale on the valuation date, at the most recent quoted bid price or mean between the most recent quoted bid and ask prices for long and short positions. For a security that trades on multiple exchanges, the primary exchange will generally be considered the exchange on which the security is generally most actively traded. For securities traded on NASDAQ, the NASDAQ Official Closing Price will be used. Prices of securities traded on the securities exchange will be obtained from recognized independent pricing agents each day that the Fund is open for business. |
Debt securities are valued by using an evaluated mean of the bid and asked prices provided by independent pricing agents. The Independent Pricing Agents may employ methodologies that utilize actual market transactions (if the security is actively traded), broker dealer supplied valuations, or other methodologies designed to identify the market value for such securities. In arriving at valuations, such methodologies generally consider factors such as security prices, yields, maturities, call features, ratings and developments relating to specific securities.
Options are valued at the last quoted sale price. If there is no such reported sale on the valuation date, both long and short positions are valued at the mean between the most recent quoted bid and ask prices.
FLexible EXchange® Options (“FLEX Options”) listed on an exchange will typically be valued at a model-based price provided by the exchange at the official close of that exchange’s trading day. However, when the Fund’s option has a same-day market trade price, this same-day market trade price will be used for FLEX Option values instead of the exchange’s model-based price. If the exchange on which the option is traded is unable to provide a model price, model-based FLEX Options prices will additionally be provided by a backup third-party pricing provider. In selecting the model prices, the Sub-Adviser may provide a review of the calculation of model prices provided by each vendor, and may note to such vendors of any data errors observed, or where an underlying component value of the model pricing package may be missing or incorrect, prior to publication by the vendor of the model pricing to the Fund Accounting Agent for purposes of that day’s net asset value (“NAV”). If either pricing vendor is not available to provide a model price for that day, the value of a FLEX Option will be determined by the Valuation Designee (as defined in Rule 2a-5) in accordance with the Pricing and Valuation Policy and Fair Value Procedures (as referenced below). In instances where in the same trading day a particular FLEX Option is both represented in an all-cash basket (either a creation unit or redemption unit), as well as in an in-kind basket (either a creation unit or redemption unit), for valuation purposes that trading day the Fund will default to use the trade price for both instances, rather than using the model price otherwise available for the in-kind transaction.
Redeemable securities issued by open-end investment companies are valued at the investment company’s applicable NAV, with the exception of exchange-traded open-end investment companies, which are priced as equity securities (listed above).
| Notes to Financial Statements | ZEGA Buy and Hedge ETF |
October 31, 2024 (Unaudited)
Under Rule 2a-5 of the 1940 Act, a fair value will be determined for securities for which quotations are not readily available by the Valuation Designee (as defined in Rule 2a-5) in accordance with the Pricing and Valuation Policy and Fair Value Procedures, as applicable, of the Adviser, subject to oversight by the Board. When a security is “fair valued,” consideration is given to the facts and circumstances relevant to the particular situation, including a review of various factors set forth in the Adviser’s Pricing and Valuation Policy and Fair Value Procedures, as applicable. Fair value pricing is an inherently subjective process, and no single standard exists for determining fair value. Different funds could reasonably arrive at different values for the same security. The use of fair value pricing by a fund may cause the NAV of its shares to differ significantly from the NAV that would be calculated without regard to such considerations.
As described above, the Fund utilizes various methods to measure the fair value of its investments on a recurring basis. U.S. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of inputs are:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.
Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available; representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability and would be based on the best information available.
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
The following is a summary of the inputs used to value the Fund’s investments as of October 31, 2024:
| Assets: | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Investments: | | | | | | | | | | | | | | | | |
| Purchased Options | | $ | — | | | $ | 18,285,612 | | | $ | — | | | $ | 18,285,612 | |
| U.S. Treasury Securities | | | — | | | | 5,059,948 | | | | — | | | | 5,059,948 | |
| Money Market Funds | | | 223,668 | | | | — | | | | — | | | | 223,668 | |
| Total Investments | | $ | 223,668 | | | $ | 23,345,560 | | | $ | — | | | $ | 23,569,228 | |
Refer to the Schedule of Investments for further disaggregation of investment categories.
| B. | Derivative Investments. An option gives the purchaser of the option the right to purchase (for a call option) or sell (for a put option) the underlying asset (or deliver cash equal to the value of an underlying index) at a specified price (“strike price”). In the event the underlying asset declines in value, the value of a call option will generally decrease (and may end up worthless) and the value of a put option will generally increase. In the event the underlying asset appreciates in value, the value of a call option will generally increase, and the value of a put option will generally decrease (and may end up worthless). FLEX Options are for settlement by the Options Clearing Corporation (“OCC”). The Sub-Adviser may “ladder” the Fund’s S&P 500® option positions. “Laddering” is an investment technique that utilizes multiple option positions over multiple expiration dates, to avoid the risk of reinvesting a large portion of assets in an unfavorable financial environment, as well as creating more opportunities to roll hedges and secure gains during extended periods of market appreciation. |
The Sub-Adviser will ladder the Fund’s S&P 500® option positions by investing in options with multiple expiration dates over a 12- month period using at least two intervals or “rungs.” By regularly rebuilding each ladder rung as options expire the Sub-Adviser will seek to achieve additional equity exposure as markets experience reduced prices (essentially buying on dips) or realize gains as market prices increase and as hedged positions are reestablished at higher levels.
The Fund has adopted financial reporting rules and regulations that require enhanced disclosure regarding derivatives and hedging activity intending to improve financial reporting of derivative instruments by enabling investors to understand how an entity uses derivatives, how derivatives are accounted for, and how derivative instruments affect an entity’s results of operations and financial position.
| Notes to Financial Statements | ZEGA Buy and Hedge ETF |
October 31, 2024 (Unaudited)
For the six-months ended October 31, 2024, the Fund’s monthly average quantity and notional value are described below:
| | | Average Contracts | | | Average Notional Amount | |
| Purchased Options | | | 1,266 | | | $ | 68,935,216 | |
| Written Options | | | (242 | ) | | | (12,758,573 | ) |
Statement of Assets and Liabilities
Fair value of derivative instruments as of October 31, 2024:
| Asset Derivatives as of October 31, 2024 | | Liability Derivatives as of October 31, 2024 |
Derivative Instruments | | Balance Sheet
Location | | Fair Value | | | Balance Sheet Location | | Fair Value | |
| Equity Contracts: | | | | | | | | | | | | |
| Purchased Options | | Investments in securities, at value | | $ | 18,285,612 | | | None | | $ | - | |
Statement of Operations
The effect of derivative instruments on the Statement of Operations for the six-months ended October 31, 2024:
Derivative Instruments | Location of Gain (Loss) on
Derivatives Recognized in Income | Realized Gain (Loss)
on Derivatives Recognized in
Income | Change in Unrealized
Appreciation/Depreciation on Derivatives Recognized in
Income |
| Equity Contracts: | | | |
Purchased Options | Realized and Unrealized Gain from investments | $908,656 | $2,812,466 |
| Written Options | Realized and Unrealized Gain from written options | 122,244 | (49,327) |
The Fund is not subject to a master netting agreement with respect to the Fund’s investment in options written and options purchased; therefore, no additional disclosures regarding netting arrangements are required.
| C. | Federal Income Taxes. The Fund has elected to be taxed as a “regulated investment company” and intends to distribute substantially all taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. Therefore, no provision for federal income taxes or excise taxes have been made. |
In order to avoid imposition of the excise tax applicable to regulated investment companies, the Fund intends to declare as dividends in each calendar year at least 98.0% of its net investment income (earned during the calendar year) and at least 98.2% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts, if any, from prior years. As a registered investment company, the Fund is subject to a 4% excise tax that is imposed if the Fund does not distribute by the end of any calendar year at least the sum of (i) 98% of its ordinary income (not taking into account any capital gain or loss) for the calendar year and (ii) 98.2% of its capital gain in excess of its capital loss (adjusted for certain ordinary losses) for a one year period generally ending on October 31 of the calendar year (unless an election is made to use the fund’s fiscal year). The Fund generally intends to distribute income and capital gains in the manner necessary to minimize (but not necessarily eliminate) the imposition of such excise tax. The Fund may retain income or capital gains and pay excise tax when it is determined that doing so is in the best interest of shareholders. Management, in consultation with the Board of Trustees, evaluates the costs of the excise tax relative to the benefits of retaining income and capital gains, including that such undistributed amounts (net of the excise tax paid) remain available for investment by the Fund and are available to supplement future distributions. Tax expense is disclosed in the Statement of Operations, if applicable.
| Notes to Financial Statements | ZEGA Buy and Hedge ETF |
October 31, 2024 (Unaudited)
As of October 31, 2024, the Fund did not have any tax positions that did not meet the threshold of being sustained by the applicable tax authority. Generally, tax authorities can examine all the tax returns filed for the last three years. The Fund identifies its major tax jurisdiction as U.S. Federal and the Commonwealth of Delaware; however, the Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits on uncertain tax positions as income tax expense in the Statement of Operations.
| D. | Securities Transactions and Investment Income. Investment securities transactions are accounted for on the trade date. Gains and losses realized on sales of securities are determined on a specific identification basis. Discounts/premiums on debt securities purchased are accreted/amortized over the life of the respective securities using the effective interest method. Dividend income is recorded on the ex-dividend date. Interest income is recorded on an accrual basis. Other non-cash dividends are recognized as investment income at the fair value of the property received. Withholding taxes on foreign dividends have been provided for in accordance with the Fund’s understanding of the applicable country’s tax rules and rates. |
| E. | Distributions to Shareholders. Distributions to shareholders from net investment income, if any, for the Fund are declared and paid at least annually. Distributions to shareholders from net realized gains on securities, if any, for the Fund normally are declared and paid on an annual basis. Distributions are recorded on the ex-dividend date. |
| F. | Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. |
| G. | Share Valuation. The NAV per share of the Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash or other assets, minus all liabilities by the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on the days on which the New York Stock Exchange (“NYSE”) is closed for trading. |
| H. | Guarantees and Indemnifications. In the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote. |
| I. | Illiquid Securities. Pursuant to Rule 22e-4 under the 1940 Act, the Fund has adopted a Board-approved Liquidity Risk Management Program (the “Program”) that requires, among other things, that the Fund limit its illiquid investments that are assets to no more than 15% of the value of the Fund’s net assets. An illiquid investment is any security that the Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. If the Fund should be in a position where the value of illiquid investments held by the Fund exceeds 15% of the Fund’s net assets, the Fund will take such steps as set forth in the Program. |
| J. | Derivatives Transactions. Pursuant to Rule 18f-4 under the 1940 Act, the SEC imposes limits on the amount of derivatives a fund can enter into, eliminates the asset segregation and cover framework arising from prior SEC guidance for covering derivatives and certain financial instruments currently used by funds to comply with Section 18 of the 1940 Act and treats derivatives as senior securities. Under Rule 18f-4, a fund’s derivatives exposure is limited through a value-at-risk test. Funds whose use of derivatives is more than a limited specified exposure amount are required to establish and maintain a comprehensive derivatives risk management program, subject to oversight by a fund’s board of trustees, and appoint a derivatives risk manager. The Fund has implemented a Rule 18f-4 Derivative Risk Management Program that complies with Rule 18f-4. |
| Notes to Financial Statements | ZEGA Buy and Hedge ETF |
October 31, 2024 (Unaudited)
| NOTE 3 – PRINCIPAL INVESTMENT RISKS |
| A. | Risks of Investing in Derivatives. The Fund invests in options, which are a form of derivative investment. Derivatives have risks, including the imperfect correlation between the value of such instruments and the underlying assets or index; the loss of principal, including the potential loss of amounts greater than the initial amount invested in the derivative instrument; and illiquidity of the derivative investments. The derivatives used by the Fund may give rise to a form of leverage. Leverage magnifies the potential for gain and the risk of loss. Certain of the Fund’s transactions in derivatives could also affect the amount, timing, and character of distributions to shareholders. The Fund’s transactions in derivatives may result in the Fund realizing more short term capital gain and ordinary income subject to tax at ordinary income tax rates than it would if it did not engage in such transactions, which may adversely impact the Fund’s after-tax returns. |
| • | Options Risk. Writing and buying options are speculative activities and entail investment exposures that are greater than their cost would suggest, meaning that a small investment in an option could have a substantial impact on the performance of the Fund. The Fund’s use of call and put options can lead to losses because of adverse movements in the price or value of the underlying stock, index, or other asset, which may be magnified by certain features of the options. These risks are heightened when the Fund’s portfolio managers use options to enhance the Fund’s return or as a substitute for a position or security. When selling a call or put option, the Fund will receive a premium; however, this premium may not be enough to offset a loss incurred by the Fund if the price of the underlying asset is above or below, respectively, the strike price by an amount equal to or greater than the premium. The value of an option may be adversely affected if the market for the option becomes less liquid or smaller, and will be affected by changes in the value or yield of the option’s underlying asset, an increase in interest rates, a change in the actual or perceived volatility of the stock market or the underlying asset and the remaining time to expiration. Additionally, the value of an option does not increase or decrease at the same rate as the underlying asset(s). The Fund’s use of options, due to the cost of the options, may reduce the Fund’s ability to achieve returns equal to the underlying asset. This means that if the underlying asset price changes, the Fund may not benefit to the same extent or at the same rate as the underlying asset price changed. In addition, if the price of the underlying asset of an option is above the strike price of a written call option or below the strike price for a written put option, the value of the option, and consequently of the Fund, may decline significantly more than if the Fund invested directly in the underlying asset instead of using options. The Fund could experience a loss if its options do not perform as anticipated, or are not correlated with the performance of their underlying index or reference asset or if the Fund is unable to purchase or liquidate a position because of an illiquid secondary market. |
| B. | Equity Markets Risk. The equity securities underlying the Fund’s option investments may experience sudden, unpredictable drops in value or long periods of decline in value. This may occur because of factors that affect securities markets generally or factors affecting specific issuers, industries, or sectors. Common stocks are generally exposed to greater risk than other types of securities, such as preferred stock and debt obligations, because common stockholders generally have inferior rights to receive payment from issuers. |
| C. | FLEX Options Risk. The Fund may invest in FLEX Options issued and guaranteed for settlement by the OCC. The Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts. Additionally, FLEX Options may be illiquid, and in such cases, the Fund may have difficulty closing out certain FLEX Options positions at desired times and prices. |
| D. | Fixed Income Securities Risk. The Fund may invest in fixed income securities directly or through ETFs or other investment companies. Fixed income securities are subject to interest rate risk (discussed further herein), credit risk (discussed further herein), call risk, prepayment and extension risk, and liquidity risk. An issuer may “call,” or repay, its high yielding bonds before their maturity dates. Fixed income securities subject to prepayment can offer less potential for gains during a declining interest rate environment and similar or greater potential for loss in a rising interest rate environment. Limited trading opportunities for certain fixed income securities may make it more difficult to sell or buy a security at a favorable price or time. |
| E. | U.S. Treasury Securities Risk. The Fund may invest in U.S. Treasury securities issued or guaranteed by the U.S. Treasury. U.S. government securities are subject to market risk, interest rate risk and counterparty risk. Securities, such as those issued or guaranteed the U.S. Treasury, that are backed by the full faith and credit of the United States are guaranteed only as to the timely payment of interest and principal when held to maturity and the market prices for such securities will fluctuate. Notwithstanding that these securities are backed by the full faith and credit of the United States, circumstances could arise that would prevent the payment of interest or principal. This would result in losses to the Fund. |
| F. | General Market Risk. Economies and financial markets throughout the world are becoming increasingly interconnected, which increases the likelihood that events or conditions in one country or region will adversely impact markets or issuers in other countries or regions. Securities in the Fund’s portfolio may underperform in comparison to securities in the general financial markets, a particular financial market, or other asset classes, due to a number of factors, including inflation (or expectations for inflation), interest rates, global demand for particular products or resources, natural disasters or events, pandemic diseases, terrorism, regulatory events, and government controls. |
| Notes to Financial Statements | ZEGA Buy and Hedge ETF |
October 31, 2024 (Unaudited)
| G. | High Yield Securities Risk. Securities rated below investment grade are often referred to as high yield securities or “junk bonds.” Investments in lower rated corporate debt securities typically entail greater price volatility and principal and income risk. High yield securities may be more susceptible to real or perceived adverse economic and competitive industry conditions than investment grade securities. The prices of high yield securities have been found to be more sensitive to adverse economic downturns or individual corporate developments. A projection of an economic downturn or of a period of rising interest rates, for example, could cause a decline in high yield security prices because the advent of a recession could lessen the ability of a highly leveraged company to make principal and interest payments on its debt securities. If an issuer of high yield securities defaults, in addition to risking payment of all or a portion of interest and principal, the Fund by investing in such securities may incur additional expenses to obtain recovery. |
| H. | Other Investment Companies Risk. The Fund may suffer losses due to the investment practices of the underlying funds as the Fund will be subject to substantially the same risks as those associated with the direct ownership of securities held by such investment companies. The Fund will incur higher and duplicative expenses when it invests in ETFs and other investment companies. By investing in another investment company, the Fund becomes a shareholder of that investment company and bears its proportionate share of the fees and expenses of the other investment company. ETFs may be less liquid than other investments, and thus their share values more volatile than the values of the investments they hold. Investments in ETFs are also subject to the “ETF Risks” described below. |
| I. | Credit Risk. An issuer or guarantor of debt instruments or the counterparty to a derivatives contract, repurchase agreement or loan of portfolio securities may be unable or unwilling to make its timely interest and/or principal payments or to otherwise honor its obligations. Debt instruments are subject to varying degrees of credit risk, which may be reflected in their credit ratings. There is the chance that the Fund’s portfolio holdings will have their credit ratings downgraded or will default (i.e., fail to make scheduled interest or principal payments), potentially reducing the Fund’s income level or share price. |
| J. | Exchange Traded Fund (“ETF”) Risks. |
| • | Authorized Participants, Market Makers, and Liquidity Providers Concentration Risk. The Fund has a limited number of financial institutions that are authorized to purchase and redeem Shares directly from the Fund (known as “Authorized Participants” or “APs”). In addition, there may be a limited number of market makers and/or liquidity providers in the marketplace. To the extent either of the following events occur, Shares may trade at a material discount to NAV and possibly face delisting: (i) APs exit the business or otherwise become unable to process creation and/or redemption orders and no other APs step forward to perform these services; or (ii) market makers and/or liquidity providers exit the business or significantly reduce their business activities and no other entities step forward to perform their functions. |
| • | Cash Redemption Risk. The Fund’s investment strategy may require it to redeem Shares for cash or to otherwise include cash as part of its redemption proceeds. For example, the Fund may not be able to redeem in-kind certain securities held by the Fund (e.g., derivative instruments and bonds that cannot be broken up beyond certain minimum sizes needed for transfer and settlement). In such a case, the Fund may be required to sell or unwind portfolio investments to obtain the cash needed to distribute redemption proceeds. This may cause the Fund to recognize a capital gain that it might not have recognized if it had made a redemption in- kind. As a result, the Fund may pay out higher annual capital gain distributions than if the in-kind redemption process was used. |
| • | Costs of Buying or Selling Shares. Due to the costs of buying or selling Shares, including brokerage commissions imposed by brokers and bid-ask spreads, frequent trading of Shares may significantly reduce investment results and an investment in Shares may not be advisable for investors who anticipate regularly making small investments. |
| • | Shares May Trade at Prices Other Than NAV. As with all ETFs, Shares may be bought and sold in the secondary market at market prices. Although it is expected that the market price of Shares will approximate the Fund’s NAV, there may be times when the market price of Shares is more than the NAV intra-day (premium) or less than the NAV intra-day (discount) due to supply and demand of Shares or during periods of market volatility. This risk is heightened in times of market volatility, periods of steep market declines, and periods when there is limited trading activity for Shares in the secondary market, in which case such premiums or discounts may be significant. |
| • | Trading. Although Shares are listed on a national securities exchange, such as NYSE Arca, Inc. (the “Exchange”), and may be traded on U.S. exchanges other than the Exchange, there can be no assurance that Shares will trade with any volume, or at all, on any stock exchange. In stressed market conditions, the liquidity of Shares may begin to mirror the liquidity of the Fund’s underlying portfolio holdings, which can be significantly less liquid than Shares. Also, in stressed market conditions, the market for Shares may become less liquid in response to deteriorating liquidity in the markets for the Fund’s underlying portfolio holdings. These adverse effects on liquidity for Shares, in turn, could lead to wider bid/ask spreads and differences between the market price of Shares and the underlying value of those Shares. |
| Notes to Financial Statements | ZEGA Buy and Hedge ETF |
October 31, 2024 (Unaudited)
| K. | High Portfolio Turnover Risk. The Fund may actively and frequently trade all or a significant portion of the securities in its portfolio. A high portfolio turnover rate increases transaction costs, which may increase the Fund’s expenses. Frequent trading may also cause adverse tax consequences for investors in the Fund due to an increase in short-term capital gains. |
| L. | Interest Rate Risk. Generally, the value of fixed income securities will change inversely with changes in interest rates. As interest rates rise, the market value of fixed income securities tends to decrease. Conversely, as interest rates fall, the market value of fixed income securities tends to increase. This risk will be greater for long-term securities than for short-term securities. Changes in government intervention may have adverse effects on investments, volatility, and illiquidity in debt markets. In addition, the interest rates payable on floating rate securities are not fixed and may fluctuate based upon changes in market rates. The interest rate on a floating rate security is a variable rate which is tied to another interest rate. Floating rate securities are subject to interest rate risk and credit risk. |
| M. | Management Risk. The Fund is actively-managed and may not meet its investment objective based on the Sub-Adviser’s success or failure to implement investment strategies for the Fund. Although the Sub-Adviser has experience managing separate accounts employing the Fund’s strategy, the Sub-Adviser may not be able to replicate the historical performance of the strategy. |
| N. | Market Capitalization Risk. |
| • | Large-Capitalization Investing. The securities of large-capitalization companies may be relatively mature compared to smaller companies and therefore subject to slower growth during times of economic expansion. Large-capitalization companies may also be unable to respond quickly to new competitive challenges, such as changes in technology and consumer tastes. |
| O. | Models and Data Risk. The composition of the Fund’s portfolio is heavily dependent on proprietary quantitative models as well as information and data supplied by third parties (“Models and Data”). When Models and Data prove to be incorrect or incomplete, any decisions made in reliance thereon may lead to the inclusion or exclusion of securities from the Fund’s portfolio universe that would have been excluded or included had the Models and Data been correct and complete. |
| P. | Tax Risk. The Fund’s investments and investment strategies, including transactions in options contracts, may be subject to special and complex federal income tax provisions, the effect of which may be, among other things: (i) to disallow, suspend, defer or otherwise limit the allowance of certain losses or deductions; (ii) to accelerate income to the Fund; (iii) to convert long-term capital gain, which is currently subject to lower tax rates, into short-term capital gain or ordinary income, which are currently subject to higher tax rates; (iv) to convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited); (v) to treat dividends that would otherwise constitute qualified dividend income as non-qualified dividend income; and (vi) to produce income that will not qualify as good income under the gross income requirements that must be met for the Fund to qualify as a regulated investment company (a “RIC”) under Subchapter M of Chapter 1, Subtitle A of the Internal Revenue Code of 1986, as amended (the “Code”). Furthermore, to the extent that any option on a futures contract held by the Fund is a “section 1256 contract” under Section 1256 of the Code, the contract will be marked to market annually, and any gain or loss will be treated as 60% long-term and 40% short-term capital gain or loss, regardless of the holding period for such contract. Section 1256 contracts may include Fund transactions involving call options on a broad-based securities index and other financial contracts. |
| NOTE 4 – COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS |
The Adviser serves as investment adviser to the Fund pursuant to an investment advisory agreement between the Adviser and the Trust, on behalf of the Fund (the “Advisory Agreement”), and, pursuant to the Advisory Agreement, provides investment advice to the Fund and oversees the day-to-day operations of the Fund, subject to the direction and oversight of the Board. The Adviser is also responsible for trading portfolio securities for the Fund, including selecting broker-dealers to execute purchase and sale transactions. The Adviser provides oversight of the Sub-Adviser, the investment sub-adviser to the Fund, and review of the Sub-Adviser’s performance.
Pursuant to the Advisory Agreement, the Fund pays the Adviser a unitary management fee (the “Investment Advisory Fee”) based on the average daily net assets of the Fund at the annualized rate of 0.95%. Out of the Investment Advisory Fee, the Adviser is obligated to pay or arrange for the payment of substantially all expenses of the Fund, including the cost of transfer agency, custody, fund administration, and all other related services necessary for the Fund to operate. Under the Advisory Agreement, the Adviser has agreed to pay, or require the Sub-Adviser to pay, all expenses incurred by the Fund except for interest charges on any borrowings, dividends and other expenses on securities sold short, taxes, brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, accrued deferred tax liability, extraordinary expenses, and distribution fees and expenses paid by the Fund under any distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act (collectively, “Excluded Expenses”) and the Investment Advisory Fee payable to the Adviser. The Investment Advisory Fees incurred are paid monthly to the Adviser. Investment Advisory Fees for the six-months ended October 31, 2024 are disclosed in the Statement of Operations.
| Notes to Financial Statements | ZEGA Buy and Hedge ETF |
October 31, 2024 (Unaudited)
The Sub-Adviser serves as investment sub-adviser to the Fund, pursuant to a sub-advisory agreement between the Adviser and the Sub-Adviser with respect to the Fund (the “Sub-Advisory Agreement”). Pursuant to the Sub-Advisory Agreement, the Sub-Adviser is responsible for the day-to-day management of the Fund’s portfolio, including determining the securities purchased and sold by the Fund, subject to the supervision of the Adviser and the Board. The Sub-Adviser is paid a fee by the Adviser, which is calculated and paid monthly, at an annual rate of 0.02% of the Fund’s average daily net assets. The Sub-Adviser has agreed to assume the Adviser’s obligation to pay all expenses incurred by the Fund except for the sub-advisory fee payable to the Sub-Adviser and Excluded Expenses. For assuming the payment obligations for the Fund, the Adviser has agreed to pay the Sub-Adviser the profits, if any, generated by the Fund’s Investment Advisory Fee less a contractual fee retained by the Adviser. Expenses incurred by the Fund and paid by the Sub-Adviser include fees charged by Tidal (defined below), which is an affiliate of the Adviser.
Tidal ETF Services LLC (“Tidal”), a Tidal Financial Group company and an affiliate of the Adviser, serves as the Fund’s administrator and, in that capacity, performs various administrative and management services for the Fund. Tidal coordinates the payment of Fund- related expenses and manages the Trust’s relationships with its various service providers.
U.S. Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund Services (“Fund Services”), serves as the Fund’s subadministrator, fund accountant and transfer agent. In those capacities, Fund Services performs various administrative and accounting services for the Fund. Fund Services prepares various federal and state regulatory filings, reports and returns for the Fund, including regulatory compliance monitoring and financial reporting; prepares reports and materials to be supplied to the Board; and monitors the activities of the Fund’s custodian. U.S. Bank N.A. (the “Custodian”), an affiliate of Fund Services, serves as the Fund’s custodian.
Foreside Fund Services, LLC (the “Distributor”) acts as the Fund’s principal underwriter in a continuous public offering of the Fund’s shares.
Certain officers and a trustee of the Trust are affiliated with the Adviser. Neither the affiliated trustee nor the Trust’s officers receive compensation from the Fund.
| NOTE 5 – PURCHASES AND SALES OF SECURITIES |
For the six-months ended October 31, 2024, the cost of purchases and proceeds from the sales or maturities of securities, excluding short-term investments, U.S. government securities, and in-kind transactions were $145,569 and $10,333,179, respectively.
For the six-months ended October 31, 2024, purchases and sales of long-term U.S. government securities were $4,460,345 and $4,062,819, respectively.
For the six-months ended October 31, 2024, in-kind transactions associated with creations and redemptions for the Fund were $55,753 and $285,272, respectively.
| NOTE 6 – INCOME TAXES AND DISTRIBUTIONS TO SHAREHOLDERS |
The tax character of distributions paid during the six-months ended October 31, 2024 (estimtated) and prior fiscal year ended April 30, 2024, respectively, were as follows:
| Distributions paid from: | October 31, 2024 | April 30, 2024 |
| Ordinary income | $- | $523,645 |
| Return of capital | - | 208,455 |
| Notes to Financial Statements | ZEGA Buy and Hedge ETF |
October 31, 2024 (Unaudited)
As of the prior fiscal year ended April 30, 2024, the components of accumulated losses on a tax basis were as follows:
| | | April 30, 2024(b) | |
| Investments, at cost(a) | | $ | 35,162,994 | |
| Gross tax unrealized appreciation | | | 765,039 | |
| Gross tax unrealized depreciation | | | (278,187 | ) |
| Net tax unrealized appreciation (depreciation) | | | 486,852 | |
| Undistributed ordinary income (loss) | | | — | |
| Undistributed long-term capital gain (loss) | | | — | |
| Total distributable earnings | | | — | |
| Other accumulated gain (loss) | | | (16,354,579 | )(c) |
| Total accumulated losses | | $ | (15,867,727 | ) |
| (a) | The difference between book and tax-basis unrealized appreciation is attributable primarily to the treatment of wash sales. |
| (b) | The Fund utilized $5,826,463 in capital loss carryovers during the year ended April 30, 2024. |
| (c) | Includes straddle loss deferral of $765,038. |
Net capital losses incurred after October 31 (post-October losses) and net investment losses incurred after December 31 (late year losses), and within the taxable year, may be elected to be deferred to the first business day of the Fund’s next taxable year. As of April 30, 2024, the Fund had not elected to defer any post-October or late year losses. As of April 30, 2024, the Fund had short-term and long-term capital loss carryovers of $11,655,076 and $3,934,465, respectively, both of which do not expire.
U.S. Bank N.A. has made available to the Fund a credit facility pursuant to a Loan Agreement for temporary or extraordinary purposes. Credit facility details for the six-months ended October 31, 2024, are as follows:
| Maximum available credit | | $ | 50,000,000 | |
| Largest amount outstanding on an individual day | | | 1,201,000 | |
| Average daily loan outstanding | | | 22,168 | |
| Credit facility outstanding as of October 31, 2024 | | | — | |
| Average interest rate, when in use | | | 8.00% | |
| Interest rate terms | | | Prime | |
| Interest rate as of October 31, 2024 | | | 8.00% | |
| Expiration date | | | June 25, 2025 | |
Interest expense incurred for the six-months ended October 31, 2024 is disclosed in the Statement of Operations, if applicable. The credit facility is an uncommitted, senior secured 364-day umbrella line of credit used for the benefit of certain funds in the Trust.
The maximum available credit is disclosed at the Trust level. The Fund’s ability to borrow is therefore limited by borrowings of other funds within the Trust which are party to the agreement and to one-third of the Fund’s total assets.
| NOTE 8 – SHARE TRANSACTIONS |
Shares of the Fund are listed and traded on the Exchange. Market prices for the shares may be different from their NAV. The Fund issues and redeems shares on a continuous basis at NAV generally in large blocks of shares (“Creation Units”). Creation Units are issued and redeemed principally in-kind for securities included in a specified universe. Once created, shares generally trade in the secondary market at market prices that change throughout the day. Except when aggregated in Creation Units, shares are not redeemable securities of the Fund. Creation Units may only be purchased or redeemed by Authorized Participants. An Authorized Participant is either (i) a broker- dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a Depository Trust Company participant and, in each case, must have executed a Participant Agreement with the Distributor. Most retail investors do not qualify as Authorized Participants nor have the resources to buy and sell whole Creation Units. Therefore, they are unable to purchase or redeem the shares directly from the Fund. Rather, most retail investors may purchase shares in the secondary market with the assistance of a broker and are subject to customary brokerage commissions or fees.
| Notes to Financial Statements | ZEGA Buy and Hedge ETF |
October 31, 2024 (Unaudited)
The Fund currently offers one class of shares, which has no front-end sales load, no deferred sales charge, and no redemption fee. A fixed transaction fee is imposed for the transfer and other transaction costs associated with the purchase or sale of Creation Units. The standard fixed transaction fee for the Fund is $300, payable to the Custodian. The fixed transaction fee may be waived on certain orders if the Fund’s Custodian has determined to waive some or all of the costs associated with the order or another party, such as the Adviser, has agreed to pay such fee. In addition, a variable fee may be charged on all cash transactions or substitutes for Creation Units and Redemption Units of up to a maximum of 2% of the value of the Creation Units and Redemption Units subject to the transaction. Variable fees are imposed to compensate the Fund for transaction costs associated with the cash transactions. Variable fees received by the Fund, if any, are disclosed in the capital shares transactions section of the Statement of Changes in Net Assets. The Fund may issue an unlimited number of shares of beneficial interest, with no par value. All shares of the Fund have equal rights and privileges.
| NOTE 9 – RECENT MARKET EVENTS |
U.S. and international markets have experienced and may continue to experience significant periods of volatility in recent years and months due to a number of economic, political and global macro factors including rising inflation, uncertainty regarding central banks’ rates, the possibility of a national or global recession, trade tensions, political events, the war between Russia and Ukraine, and significant conflict between Israel and Hamas in the Middle East. As a result of continuing political tensions and armed conflicts, including the war between Ukraine and Russia, the U.S. and the European Union imposed sanctions on certain Russian individuals and companies, including certain financial institutions, and have limited certain exports and imports to and from Russia. The war has contributed to recent market volatility and may continue to do so. The Middle East conflict has led to significant loss of life, damaged infrastructure and escalated tensions both in the region and globally. These developments, as well as other events, could result in further market volatility and negatively affect financial asset prices, the liquidity of certain securities and the normal operations of securities exchanges and other markets, despite government efforts to address market disruptions. As a result, the risk environment remains elevated.
| NOTE 10 – SUBSEQUENT EVENTS |
In preparing these financial statements, management has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued. Management has determined that there are no subsequent events that would need to be recognized or disclosed in the Fund’s financial statements.
| (b) | Financial Highlights are included within the financial statements filed under Item 7(a) of this Form. |
Item 8. Changes in and Disagreements with Accountants for Open-End Investment Companies.
There have been no changes in or disagreements with the Fund’s accountants.
Item 9. Proxy Disclosure for Open-End Investment Companies.
There were no matters submitted to a vote of shareholders during the period covered by the report.
Item 10. Remuneration Paid to Directors, Officers, and Others of Open-End Investment Companies.
See Item 7(a). Under the Investment Advisory Agreement, in exchange for a single unitary management fee from the Fund, the Adviser has agreed to pay all expenses incurred by the Fund, including Trustee compensation, except for certain excluded expenses.
Item 11. Statement Regarding Basis for Approval of Investment Advisory and Sub-Advisory Contracts.
Not applicable.
Item 12. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 13. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 14. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 15. Submission of Matters to a Vote of Security Holders.
Not Applicable.
Item 16. Controls and Procedures.
| (a) | The Registrant’s President/Principal Executive Officer and Treasurer/Principal Financial Officer have reviewed the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider. |
| (b) | There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
Item 17. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 18. Recovery of Erroneously Awarded Compensation.
(a) Not Applicable
(b) Not Applicable
Item 19. Exhibits.
| (a) | (1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Not applicable. |
(2) Any policy required by the listing standards adopted pursuant to Rule 10D-1 under the Exchange Act (17 CFR 240.10D-1) by the registered national securities exchange or registered national securities association upon which the registrant’s securities are listed. Not applicable.
(3) A separate certification for each principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(4) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable.
(5) Change in the registrant’s independent public accountant. Provide the information called for by Item 4 of Form 8-K under the Exchange Act (17 CFR 249.308). Unless otherwise specified by Item 4, or related to and necessary for a complete understanding of information not previously disclosed, the information should relate to events occurring during the reporting period. Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | (Registrant) | Tidal ETF Trust |
| | By (Signature and Title)* | /s/ Eric W. Falkeis |
| | | Eric W. Falkeis, President/Principal Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | By (Signature and Title)* | /s/ Eric W. Falkeis |
| | | Eric W. Falkeis, President/Principal Executive Officer |
| | By (Signature and Title)* | /s/ Aaron J. Perkovich |
| | | Aaron J. Perkovich, Treasurer/Principal Financial Officer |
* Print the name and title of each signing officer under his or her signature.
