TRES — Defiance Treasury Alternative Yield ETF

TRES Fund Overview

TRES — Defiance Treasury Alternative Yield ETF is a US ETF managed by Tidal Trust II, categorised as Ultra-Short Treasury / Sovereign Bond. ABC INVEST provides holdings, performance, costs, cashflows, risk data, prospectus documents and SEC filings, sourced from SEC filings.

• Type: US ETF
• Manager: Tidal Trust II
• Category: Ultra-Short Treasury / Sovereign Bond
• Assets under management: $2.97M
• Ticker: TRES
• SEC CIK: 0001924868
• SEC series ID: S000083887
• Share class ID: C000247972

TRES Investment Objective and Strategy

Defiance Treasury Alternative Yield ETF describes its objective and strategy as follows, from its latest prospectus filed with the SEC by Tidal Trust II.

Investment objective

The Defiance Treasury Alternative Yield ETF (the Fund) seeks current income.

Principal investment strategy

The Fund is an actively-managed exchange-traded fund (ETF) that seeks to generate current income by: (i) investing in U.S. government securities, including U.S. Treasury bills, U.S. Treasury notes, and U.S. Treasury bonds (collectively, Treasuries) with a targeted portfolio duration of one year or less; and (ii) employing defined risk option strategies. These strategies include credit spreads, debit spreads, long calls, and long puts. To implement these risk strategies, the Fund will purchase and sell option contracts on selected exchange-traded Treasury funds (Treasury ETFs). The Fund will not invest directly in Treasury ETFs. The Funds net asset holdings will generally be invested as follows: ? 2-5% Cash and cash equivalents. ? 80-100% Treasuries. ? up to 100% in options contracts (using Treasuries as collateral).

For its options contract holdings, the Fund may invest up to 100% of its net assets using a combination of options strategies, subject to the following ranges: ? 0-50% in debit spreads, calendar spreads, diagonal spreads, and/or puts and calls on Treasury ETFs. ? 0% - 80% in credit spreads. Defined Risk Options Strategies The Funds investment strategy is primarily driven by its options strategies. The Fund will primarily invest in options strategies involving Treasury ETFs, allocating up to 50% of its net assets to long option positions, debit spreads, calendar spreads, and diagonal spreads (each, based on the net premium). The Fund will also allocate up to 80% of its net assets to credit spreads (using Treasury securities as collateral). ZEGA Financial, LLC (ZEGA), the Funds investment sub-adviser, tactically implements these options strategies.

ZEGA assesses Treasury ETF options pricing against current market conditions, heavily weighing factors such as interest rates, the shape of the yield curve (focusing on the longer end), and bond market volatility. The Fund adopts a defined risk management approach to its options trading, meaning all options are covered. The Fund does not engage in uncovered (naked) options trading. Each options position is part of a defined risk strategy, either pairing two options to set clear boundaries for potential gains and losses from the outset or using long individual options. The maximum risk level for each option spread can range from 20% to 80%, depending on the options time to expiration. For individual long calls or puts, the risk is limited to the premium paid. ZEGA constructs a portfolio for the Fund designed to reduce interest rate volatility by analyzing market data to determine the timing and levels for placing options trades.

The Funds holdings may include bullish, bearish, or neutral credit and debit spreads, as well as long put and call options. When appropriate, the Fund can maintain positions with both bullish and bearish leanings. The following outlines the differing options strategies that the Fund will implement based on ZEGAs analyses. ? Option Spread Strategies Overview : The Fund uses vertical spreads and calendar spreads, including diagonal spreads. Vertical spread (both credit and debit) strategies involve simultaneously buying and selling options of the same type (puts or calls) on Treasury ETFs with the same expiration date but at different exercise (strike) prices. The key distinction between a credit spread and a debit spread lies in the initial financial impact: credit spreads generate upfront income (a net credit), while debit spreads involve an upfront expense (a net debit).

The Fund also employs calendar spreads where the short option expires prior to the long option. The exercise (strike) may be the same or different. ? Vertical Credit Spreads : In this strategy, the Fund earns an initial income (net credit) because it sells an option at a higher premium and simultaneously buys another at a lower premium. The option sold is nearer to the current market price (closer to the money), whereas the option bought is further away. Typically, ZEGA resorts to credit spreads when it anticipates minimal movement in Treasury ETF prices, either stable or slightly fluctuating. This strategy leans towards a neutral stance with a hint of bullish or bearish potential. The maximum profit for the Fund is the initial net credit received, while the maximum loss is calculated by subtracting the initial credit from the difference between the strike prices.

? Vertical Debit Spreads : This strategy leads to an initial expense (net debit) for the Fund because it buys an option at a higher premium and sells another at a lower premium. Here, the option bought is nearer to the market price (closer to the money), while the option sold is more distant. ZEGA typically employs debit spreads when it holds a moderately positive or negative outlook on Treasury ETFs. The Funds maximum profit is the difference between the strike prices minus the initial debit. In contrast, the maximum loss is confined to the initial debit paid. ? Calendar/Diagonal Spreads : In this strategy, the Fund implements an options strategy involving long and short positions on the same asset (in this case, Treasury ETFs) with differing expiration dates. Ordinarily, the Fund purchases a contract with a longer-term expiration and sells one with a nearer-term expiration.

When the strike prices vary, this is known as a diagonal spread. Calendar spreads maintain consistency by using the same type of option (put or call) for both positions. ? Long Put Options Strategy Overview : The Fund may adopt a long put option strategy, particularly when ZEGA anticipates a decline in the price of a Treasury ETFa bearish outlook. The risk associated with this strategy is confined to the premium paid for the option. This approach serves as a protective measure against potential drops in value while also offering the potential for profit if the ETFs price indeed falls. The most significant gain achievable with this strategy is limited to the value of the underlying Treasury ETF dropping to zero. ? Long Call Options Strategy Overview : The Fund might implement a long call option strategy when ZEGA foresees an increase in a Treasury ETFs pricereflecting a bullish stance.

The risk here is also restricted to the options premium. This strategy not only hedges against potential downside loss but also opens up opportunities for profit in the event of a price rise. Unlike the long put, the maximum gain for a long call is theoretically boundless, as the ETFs price could climb indefinitely. However, the maximum loss remains limited to the premium paid for the option. For more information on credit spreads, debit spreads, and options terminology, see the section of the Funds Prospectus titled Additional Information About the Fund. ZEGA uses options spreads on Treasury ETFs, coupled with long put and call options strategies on Treasury ETFs, aiming for income generation and capital gains across different interest rate environments. The Fund seeks to earn income from favorable discrepancies between premiums at the start of options positions, and any beneficial movement of the underlying Treasury ETF prices relative to the options strike prices until expiration.

This consolidated strategy seeks to generate income across a variety of interest rate scenarios, striving for a more stable and risk-adjusted performance. All option positions held by the Fund are exchange-traded and collateralized with cash and cash equivalents (for example, Treasuries and money market fund shares) Under normal market conditions, the Fund will invest at least 80% of its assets, plus borrowings for investment purposes, in Treasuries. In pursuing its options strategies, the Fund may also allocate up to 80% of its net assets to credit spreads. Concurrently, the Fund may invest up to 50% of its net assets to a combination of debit spreads, calendar spreads, diagonal spreads, and long calls and/or puts on Treasury ETFs. Collectively, the Funds total investment in options strategies will not exceed 100% of the Funds net assets.

The Fund is non-diversified for purposes of the 1940 Act, which means that the Fund may invest in fewer issuers at any one time than a diversified fund.

TRES Holdings

Top 5 holdings of Defiance Treasury Alternative Yield ETF by percentage of net assets, from the fund's latest SEC N-PORT filing.

View all TRES holdings

TRES Portfolio Allocation

Asset-class allocation of Defiance Treasury Alternative Yield ETF by percentage of net assets, from the latest SEC N-PORT filing.

TRES Costs and Fees

TRES costs about $75 per $10,000 invested per year in fund expenses.

• Net expense ratio: 0.75%
• Gross expense ratio: 0.75%

TRES Cashflows

Over the 12 months to 2024-05, Defiance Treasury Alternative Yield ETF had net inflows of $3.49M, from monthly SEC N-PORT filings.

TRES Debt Constituents

Largest debt holdings of Defiance Treasury Alternative Yield ETF by percentage of net assets, from the latest SEC N-PORT filing.

TRES Prospectus and SEC Filings

Official Defiance Treasury Alternative Yield ETF filings on SEC EDGAR — prospectus, portfolio holdings and annual reports.

• Prospectus (485BPOS) — filed 2024-01-23
• Portfolio holdings (N-PORT) — filed 2024-07-30
• Portfolio holdings (N-PORT) — filed 2024-04-19

Related Funds

Other Ultra-Short Treasury / Sovereign Bond funds tracked on ABC INVEST:

• Vanguard 0-3 Month Treasury Bill ETF (VBIL)
• US Treasury 3 Month Bill ETF (TBIL)
• Global X 1-3 Month T-Bill ETF (CLIP)
• Invesco Short Term Treasury ETF (TBLL)
• Abbey Capital Futures Strategy Fund (ABYAX)

Data Sources

ABC INVEST compiles this page from public filings made to the U.S. Securities and Exchange Commission (SEC) through EDGAR: portfolio holdings and monthly cashflows from Form N-PORT, expenses and returns from fund prospectuses (Form 485BPOS) and the SEC DERA Risk/Return Summary data sets, annual data from Form N-CEN, and shareholder reports from Form N-CSR.