Accounting Policies, by Policy (Policies)

6 Months Ended

Jun. 30, 2023

(a)

Basis of Presentation

Pursuant to rules and regulations of the U.S. Securities and Exchange Commission (“SEC”), these financial statements are presented for the Trust as a whole, as the SEC registrant and the Fund individually. The liabilities and expenses incurred, contracted for or otherwise existing with respect to each series of the Trust shall be enforceable only against the assets of each series of the Trust and not against the assets of the Trust generally or any other series.

The Funds are investment companies and accordingly follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 “Financial Services – Investment Companies”.

The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of its financial statement. The financial statement has been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Use of Estimates

(b) Use of Estimates

The preparation of the financial statement in conformity with 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 this financial statement, as well as the reported amounts of investment income and expenses during the period. Actual results could differ from those estimates.

Guarantees and Indemnifications

Under the Funds’ organizational documents, the Sponsor is indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, in the normal course of business, the Funds enter into contracts with service providers and others that provide general indemnification clauses. The Funds’ maximum exposure under the contracts is unknown, as this would involve future claims that may be made against the Funds.

Income Taxes

(d) Income Taxes

The Funds are classified as partnerships for United States federal income tax purposes and treated as separate entities from any other series of the Trust for U.S. federal income tax purposes. Accordingly, the Funds do not expect to incur United States federal income taxes. No provision for federal, state, and local income taxes has been made in the accompanying Statements of Assets and Liabilities, as shareholders are individually responsible for their own income taxes, if any, on their allocable share of the Funds’ income, gain, loss, deductions, and other items.

Management of the Funds has reviewed all open tax years and major jurisdictions and concluded that there is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns. The Funds are also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. On an ongoing basis, management monitors its tax positions taken under the interpretation to determine if adjustments to conclusions are necessary based on factors including, but not limited to, on-going analysis of tax law, regulation, and interpretations thereof.

Organizational and Offering Costs

(e) Organizational and Offering Costs

All organizational and offering costs for the Funds were borne by the Sponsor and are not subject to reimbursement.

Investment Valuation

(f) Investment Valuation

The Funds value their investments at fair value. Short-term investments are valued using information provided by a third-party pricing service or market quotations. In each of these situations, valuations are typically categorized as Level I in the fair value hierarchy.

Derivatives (e.g., futures contracts) are generally valued using independent sources and/or agreements with counterparties or other procedures as determined by the Sponsor. Futures contracts are generally valued at the last settled price on the applicable exchange on which that futures contract trades. For financial reporting purposes, all futures contracts are generally valued at the last settled price. Futures contracts valuations are typically categorized as Level 1 in the fair value hierarchy. Swap agreement valuations are typically categorized as Level 2 in the fair value hierarchy. The Sponsor may in its sole discretion choose to determine a fair value price as the basis for determining the market value of such position. Such fair value prices would generally be determined based on available inputs about the current value of the underlying financial instrument or commodity and would be based on principles that the Sponsor deems fair and equitable so long as such principles are consistent with industry standards. The Sponsor may fair value an asset of a Fund pursuant to the policies the Sponsor has adopted. Depending on the source and relevant significance of valuation inputs, these instruments may be classified as Level 2 or Level 3 in the fair value hierarchy.

Fair value pricing may require subjective determinations about the value of an investment. While the Funds’ policies are intended to result in a calculation of its respective Fund’s NAV that fairly reflects investment values as of the time of pricing, such Fund cannot ensure that fair values determined by the Sponsor or persons acting at their direction would accurately reflect the price that a Fund could obtain for an investment if it were to dispose of that investment as of the time of pricing (for instance, in a forced or distressed sale). The prices used by such Fund may differ from the value that would be realized if the investments were sold and the differences could be material to the financial statements.

The Funds disclose the fair value of their investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The disclosure requirements establish a fair value hierarchy that distinguishes between: (1) market participant assumptions developed based on market data obtained from sources independent of the Funds (observable inputs); and (2) the Funds’ own assumptions about market participant assumptions developed based on the best information available under the circumstances (unobservable inputs). The three levels defined by the disclosure requirements hierarchy are as follows:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 assets include the following: quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).

Level 3 – Unobservable pricing input at the measurement date for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available.

In some instances, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest input level that is significant to the fair value measurement in its entirety.

Fair value measurements also require additional disclosure when the volume and level of activity for the asset or liability have significantly decreased, as well as when circumstances indicate that a transaction is not orderly.

The following table summarizes the valuation of investments at June 30, 2023 and December 31, 2022 using the fair value hierarchy:

June 30, 2023

ConvexityShares Daily 1.5x SPIKES Futures ETF	Level 1			Level 2		Level 3		Total
Assets
Investments at Fair Value
Short-Term Investment	$	81,917		$	-	$	-	$	81,917
Liabilities
Other Instruments
Futures Contracts⁽¹⁾		(62,530	)		-		-		(62,530	)
Total	$	19,387		$	-	$	-	$	19,387

ConvexityShares 1x SPIKES Futures ETF	Level 1			Level 2		Level 3		Total
Assets
Investments at Fair Value
Short-Term Investment	$	350,143		$	-	$	-	$	350,143
Liabilities
Other Instruments
Futures Contracts⁽¹⁾		(71,129	)		-		-		(71,129	)
Total	$	279,014		$	-	$	-	$	279,014

ConvexityShares Trust Combined	Level 1			Level 2		Level 3		Total
Assets
Investments at Fair Value
Short-Term Investment	$	432,060		$	-	$	-	$	432,060
Liabilities
Other Instruments
Futures Contracts⁽¹⁾		(133,659	)		-		-		(133,659	)
Total	$	298,401		$	-	$	-	$	298,401

⁽¹⁾	Futures contracts are valued at the net unrealized appreciation (depreciation) on the instrument as presented on the Schedules of Open Futures contracts.

For the period ended June 30, 2023, there were no transfers into or out of Level 3 securities and no Level 3 securities held.

December 31, 2022

ConvexityShares Daily 1.5x SPIKES Index Futures ETF	Level 1			Level 2		Level 3		Total
Assets
Investments at Fair Value
Short-Term Investment	$	303,154		$	-	$	-	$	303,154
Liabilities
Other Instruments
Futures Contracts⁽¹⁾		(54,064	)		-		-		(54,064	)
	$	249,090		$	-	$	-	$	249,090

ConvexityShares 1x SPIKES Index Futures ETF	Level 1			Level 2		Level 3		Total
Assets
Investments at Fair Value
Short-Term Investment	$	559,661		$	-	$	-	$	559,661
Liabilities
Other Instruments
Futures Contracts⁽¹⁾		(37,519	)		-		-		(37,519	)
	$	522,142		$	-	$	-	$	522,142

ConvexityShares Trust Combined	Level 1			Level 2		Level 3		Total
Assets
Investments at Fair Value
Short-Term Investment	$	862,815		$	-	$	-	$	862,815
Liabilities
Other Instruments
Futures Contracts⁽¹⁾		(91,583	)		-		-		(91,583	)
	$	771,232		$	-	$	-	$	771,232

⁽¹⁾	Futures contracts are valued at the net unrealized appreciation (depreciation) on the instrument as presented on the Schedules of Open Futures contracts.

For the period ended December 31, 2022, there were no transfers into or out of Level 3 securities and no Level 3 securities held.

Investment Transactions and Related Income

(g) Investment Transactions and Related Income

Investment transactions are recorded on the trade date. All such transactions are recorded on the identified cost basis and marked to market daily. Dividend income is recorded on the ex-dividend date. Discount and premiums on securities purchased are amortized or accreted using the effective interest method. Realized gains and losses from security transactions are unrealized appreciation and depreciation of securities transactions are determined using the identified cost basis method for financial reporting.

Accounting for Derivative Instruments

(h) Accounting for Derivative Instruments

In seeking to achieve each Fund’s investment objective, the Sponsor uses a mathematical approach to investing. Using this approach, the Sponsor determines the type, quantity and mix of investment positions, including derivative positions, which the Sponsor believes in combination, should produce returns consistent with a Fund’s objective.

All open derivative positions at period end are reflected on each respective Fund’s Schedule of Open Futures Contracts. Certain Funds utilized a varying level of derivative instruments in conjunction with investment securities in seeking to meet their investment objectives during the period. While the volume of open positions may vary on a daily basis as each Fund transacts derivatives contracts in order to achieve the appropriate exposure to meet its investment objective, the volume of these open positions relative to the net assets of each respective Fund at the date of this report is generally representative of open positions throughout the reporting period.

Following is a description of the derivative instruments used by the Funds during the reporting period, including the primary underlying risk exposures related to each instrument type.

Futures Contracts

The Funds may enter into futures contracts to gain exposure to changes in the value of, or as a substitute for investing directly in (or shorting), an underlying benchmark. A futures contract obligates the seller to deliver (and the purchaser to accept) the future delivery of a specified quantity and type of asset at a specified time and place. The contractual obligations of a buyer or seller may generally be satisfied by taking or making physical delivery of the underlying commodity, if applicable, or by making an offsetting sale or purchase of an identical futures contract on the same or linked exchange before the designated date of delivery, or by cash settlement at expiration of contract.

Upon entering into a futures contract, each Fund is required to deposit and maintain as collateral at least such initial margin as required by the exchange on which the transaction is affected. The initial margin is segregated as cash and/or securities balances on deposit at broker for futures contracts, as disclosed in the Statements of Assets and Liabilities, and is restricted as to its use. The Funds that enter into futures contracts maintain collateral at the broker in the form of cash and/or securities. Pursuant to the futures contract, each Fund generally agrees to receive from or pay to the broker(s) an amount of cash collateral equal to the daily fluctuation in value of the futures contract. Such receipts or payments are known as variation margin and are recorded by each Fund as unrealized gains or losses. Each Fund will realize a gain or loss upon closing of a futures transaction.

Futures contracts involve, to varying degrees, elements of market risk (specifically exchange rate sensitivity, commodity price risk or equity market volatility risk) and exposure to loss in excess of the amount of variation margin. The face or contract amounts reflect the extent of the total exposure each Fund has in the particular classes of instruments. Additional risks associated with the use of futures contracts are imperfect correlation between movements in the price of the futures contracts and the market value of the underlying Index or commodity and the possibility of an illiquid market for a futures contract. With futures contracts, there is minimal but some counterparty risk to the Funds since futures contracts are exchange-traded and the credit risk resides with the Funds’ clearing broker or clearinghouse itself. Many futures exchanges and boards of trade limit the amount of fluctuation permitted in futures contract prices during a single trading day. Once the daily limit has been reached in a particular contract, no trades may be made that day at a price beyond that limit or trading may be suspended for specified times during the trading day. Futures contracts prices could move to the limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures positions and potentially subjecting a fund to substantial losses. If trading is not possible, or if a fund determines not to close a futures position in anticipation of adverse price movements, the fund will be required to make daily cash payments of variation margin. The risk the fund will be unable to close out a futures position will be minimized by entering into such transactions on a national exchange with an active and liquid secondary market.

For the period ended June 30, 2023, the average derivative volume is described below:

Futures Contracts
	Monthly		Monthly Average
Fund	Average Quantity		Notional Value

ConvexityShares Daily 1.5x SPIKES Futures ETF		53	$	1,046,172
ConvexityShares 1x SPIKES Futures ETF		40		778,212
ConvexityShares Trust (combined)		93	$	1,824,384

For the period ended June 30, 2022, the average derivative volume is described below:

Futures Contracts

	Monthly Average		Monthly Average Notional
Fund	Quantity		Value

ConvexityShares Daily 1.5x SPIKES Futures ETF		-	$	-
ConvexityShares 1x SPIKES Futures ETF		-		-
ConvexityShares Trust (combined)		-	$	-

Statements of Assets and Liabilities

The effect of derivative instruments on the Statements of Assets and Liabilities as of June 30, 2023.

	Fund	Statement of Assets and Liabilities Location	Fair Value
			Assets		Liabilities
Futures Contracts
SPIKES Volatility Index	ConvexityShares Daily 1.5x SPIKES Futures ETF	Net Variation Margin Payable	$	-	$	8,702
	ConvexityShares 1x SPIKES Futures ETF	Net Variation Margin Payable		-		10,237
Total Futures Contracts			$	-	$	18,939

Statements of Assets and Liabilities

The effect of derivative instruments on the Statements of Assets and Liabilities as of December 31, 2022.

	Fund	Statements of Assets and Liabilities Location	Fair Value
			Assets		Liabilities
Futures Contracts
SPIKES Volatility Index	ConvexityShares Daily 1.5x SPIKES Futures ETF	Net Variation Margin Payable	$	-	$	2,547
	ConvexityShares 1x SPIKES Futures ETF	Net Variation Margin Payable		-		1,873

Total Futures Contracts			$	-	$	4,420

Statements of Operations

The effect of derivative instruments on the Statements of Operations for the six months ended June 30, 2023:

Derivatives	Fund	Net Realized Gain (Loss) on Futures Contracts			Net Change in Unrealized Appreciation (Depreciation) on Futures Contracts
SPIKES Volatility Index Futures	ConvexityShares Daily 1.5x SPIKES Futures ETF	$	(909,840	)	$	(8,465	)
SPIKES Volatility Index Futures	ConvexityShares 1x SPIKES Futures ETF		(630,557	)		(33,610	)
Total		$	(1,540,397	)	$	(42,075	)

The effect of derivative instruments on the Statements of Operations for the three months ended June 30, 2023:

Derivatives	Fund	Net Realized Gain (Loss) on Futures Contracts			Net Change in Unrealized Appreciation (Depreciation) on Futures Contracts
SPIKES Volatility Index Futures	ConvexityShares Daily 1.5x SPIKES Futures ETF	$	(647,070	)	$	87,912
SPIKES Volatility Index Futures	ConvexityShares 1x SPIKES Futures ETF		(437,604	)		2,863
Total		$	(1,084,674	)	$	90,775

- Definition

Disclosure of accounting policy for income taxes, which may include its accounting policies for recognizing and measuring deferred tax assets and liabilities and related valuation allowances, recognizing investment tax credits, operating loss carryforwards, tax credit carryforwards, and other carryforwards, methodologies for determining its effective income tax rate and the characterization of interest and penalties in the financial statements.

+ References + Details

- Definition

Disclosure of accounting policy for investment in financial asset.

+ References + Details

ConvexityShares Trust 10-Q