David Nicholas, founder of Nicholas X Funds and a financial advisor with over 20 years of wealth management experience in Atlanta, joins Brad Roth to break down how he built one of the more ambitious ETF suites in the smaller issuer space. From FIX — a liquid alternative to fixed annuities — to BLOX, a crypto fund approaching $250 million in assets, to a new wave of commodity-equity-options funds, David walks through the common architecture, his options philosophy, and what it actually takes to scale an ETF business by betting revenue back into new launches.
About David Nicholas and Nicholas X Funds
David Nicholas still runs a private wealth practice in Atlanta alongside the ETF business. His fund journey started during COVID, when he saw an opportunity to recreate the insurance company balance sheet — 90 to 95% fixed income, with interest income used to buy long call options for equity upside — in a liquid ETF wrapper. That became FIX, which attracted institutional investors including foreign governments. From there: GIAX, then BLOX (the crypto fund, now approaching $250 million), and now a wave of thematic commodity funds — SLVX (silver), GLDN (gold), WEAPON (defense), a nuclear fund, and two additional Bitcoin-based products in development.
Investment Strategy and Approach
The common thread across X Funds — beyond FIX, which has its own unique structure — is a three-part architecture: roughly 50% commodity or core asset exposure, 50% equity positions in companies that benefit from that commodity, and an active options overlay on both sleeves. David describes this as owning the whole ecosystem rather than just the commodity. In SLVX, that means silver spot exposure through ETFs like SLV and PSLV paired with silver miners and royalty companies — First Majestic, Pan American Silver, Wheaton Precious Metals — with an options overlay on top. WEAPON pairs rare earth materials with traditional defense companies. The nuclear fund pairs uranium with nuclear industry operators.
The options architecture is the piece David defends most carefully. His core argument: covered call strategies almost never beat the underlying in rising markets because the short call caps upside. X Funds use short put spreads on equity positions instead — collecting premium while preserving full participation in gains. On the commodity ETF sleeves, where they do sell call spreads, they also buy long calls above the spread to recapture gains on sharp moves higher. None of the funds track an index. All are actively managed with the ability to shift from puts to calls, add protective hedges, or remove them at any time.
Deeper Dive: Insights from the Full Conversation
On NAV Decline — The Real Question
David confronts the income fund critique head-on: high distributions can mask declining NAV, leaving investors worse off than a simple buy-and-hold. His answer draws a hard line between two types of NAV decline — over-distribution (bad) and underlying positions going down (acceptable, even expected in volatile asset classes).
He uses BLOX as the case study. The fund generates roughly 50% options yield but distributes only 36%, targeting an 80% success rate on trades. The remaining yield is a buffer against imperfect execution. Bitcoin is down 20 to 30% since inception; BLOX is roughly flat — outperforming its underlying without the distribution dragging NAV. Competitors in the crypto income space declare 40 to 50% yield. David says he could match that tomorrow, but considers it irresponsible if the options income doesn't justify it.
On Launching Four Funds at Once
The crawl-walk-run framing is David's own. One fund per year for the first three years — each one funded by the success of the last. BLOX crossed $100 million almost overnight, which gave the firm the revenue base to accelerate. Rather than continuing to space launches out, David made the decision to take essentially all revenue from the first three funds and reinvest it into launching six new products simultaneously. The logic: if the product is unique and performs, AUM follows. The constraint was always capital, not ideas or conviction.
On Scaling and Replacing Yourself
David is candid about the limits of the founder model. The first three funds had his fingerprints on everything — construction, design, marketing, strategy. For the firm to grow past his own ceiling, he needs to hire people who are better than him at specific things. The transition is intentional and underway. He frames it the same way he managed his private wealth business: systematically remove yourself from areas where specialized talent can outperform you, so the business can grow faster than any individual can scale.
On Compliance as the Marketing Ceiling
The hardest part of building an ETF business, in David's view, is not performance or product design — it is marketing within compliance constraints. You can have the best-performing fund in the world, but if nobody knows about it, you are burning capital to hold a product that never reaches escape velocity. Finding creative distribution approaches that stay on the right side of the rules is the operational challenge that separates firms that survive from those that don't.
Notable Insights
"Covered call strategies have rarely ever beat the underlying in a rising market because the short call caps your upside. What we did with put spreads is we can capture all of the upside without really capping our upside."
"There's NAV decline because you're distributing more than the fund is appreciating, and there's NAV decline because the fund is going down because the underlying positions are going down. I'm good with the latter. I don't want a NAV to go down because the fund is overdistributing."
"If you put out a product that is unique and that has good performance, the AUM will follow. I'm basically taking all of our revenue and pouring it back into these new funds. It's me with a lot of faith."
Key Takeaways
- All X Funds share a three-part architecture: ~50% commodity or core asset, ~50% ecosystem equity companies, plus an active options overlay on both sleeves.
- Short put spreads on equity positions preserve full upside participation while collecting income — unlike covered calls, which cap gains in rising markets.
- BLOX distributes 36% of roughly 50% options yield, targeting an 80% trade success rate — distribution tied directly to actual options income, not an arbitrary yield target.
- Two types of NAV decline: over-distribution (avoidable) vs. underlying decline (acceptable and expected in volatile asset classes like crypto and commodities).
- SLVX treats silver as a dual-demand metal — monetary hedge and industrial input — owning the full ecosystem: spot silver, miners, royalty companies, and an options overlay.
- Scaling requires systematically replacing founder fingerprints with specialized talent; compliance-constrained marketing is the binding constraint on growth, not product design.
What This Means for Advisors
For advisors evaluating commodity exposure or income-generating alternatives, the X Funds suite introduces a structure worth understanding carefully. The picks-and-shovels approach — owning the full ecosystem around a commodity rather than just the spot price — offers differentiated return potential: miners and royalty companies can outperform the underlying commodity in favorable cycles, while the options overlay adds income without a covered call cap. The key due diligence question is the one David raises himself: what is the options strategy actually generating, and does the distribution rate reflect that honestly?
These are actively managed funds with significant discretion — not passive index products with an options wrapper. Advisors comfortable with that trade-off and with commodity allocations broadly will find the architecture compelling.
Listen to the Full Episode
This article is based on an episode of Behind the Ticker, hosted by Brad Roth, Founder and CIO of THOR Financial Technologies. For the full conversation with David Nicholas, listen on Spotify, Apple Podcasts, or watch on YouTube.