YieldMax’s first four ETFs launched in November 2022 and really caught investors’ attention. Yields up to almost 79% will do that.
Recently, another seven YieldMax ETFs started trading on the stock exchange.
Let’s take a look at whether these new single-stock ETFs are worth your time and money…
A covered call options strategy involves selling call options for income backed by shares in your portfolio. In recent years, the strategy has spread to ETF sponsors, who offer funds that generate income through selling options. These funds have used broader market indexes, such as the S&P 500, as their underlying asset.
YieldMax has launched covered call ETFs on individual stocks, as well as some more narrowly focused ETFs. According to the prospectus, the funds use a synthetic covered call strategy to provide income and exposure to the share price returns of the underlying stocks. According to the YieldMax prospectus, the strategy provides:
- Exposure to the share price returns of the stock.
- Current income from the option premiums, and
- A limit on the Fund’s participation in gains, if any, of the share price returns of the stock.
Here are the first four YieldMax ETFs that launched in November. Included are the underlying stocks or ETFs and the current yields reported on the company’s website:
YieldMax ARKK Option Income Strategy ETF (OARK) applies the strategy to the Ark Innovation ETF (ETF). OARK yields 57.4%.
YieldMax AAPL Option Income Strategy ETF (APLY) “covers” Apple, Inc. (AAPL). APLY yields 32.94%.
YieldMax NVDA Option Income Strategy ETF (NVDY) applies the strategy to NVIDIA Corporation (NVDA). NVDY yields 41.02%.
YieldMax TSLA Option Income Strategy ETF (TSLY) is the covered call ETF for Tesla, Inc. (TSLA). TSLY yields 69.36%.
These are eye-popping yields. Dividends and yields will vary, and the high yields come from the high volatility of the underlying stocks.
On August 24, YieldMax launched another group of covered call ETFs. They have not yet paid dividends, so they don’t have a yield. Here are the funds and the underlying stocks:
YieldMax AMZN Option Income Strategy ETF (AMZY)—Amazon.com, Inc. (AMZN)
YieldMax META Option Income Strategy ETF (FBY)—Meta Platforms, Inc. (META)
YieldMax GOOGL Option Income Strategy ETF (GOOY)—Alphabet, Inc. (GOOGL)
YieldMax NFLX Option Income Strategy ETF (NFLX)—Netflix, Inc. (NFLX)
YieldMax COIN Option Income Strategy ETF (CONY)—Coinbase Global, Inc. (COIN)
The prospectuses list several more stocks that will soon have their own covered call ETFs.
These are interesting funds and may have a place in your portfolio. They allow investors to get exposure to the underlying stocks at a low cost—the YieldMax ETFs trade for around $20 per share. The option income provides added returns, especially if share prices stagnate. Investors are fully exposed to any share price declines.
The underlying investments are ones that crashed in 2022 and have surged in 2023. It’s hard to predict where they will go from here. If you have a strong opinion about one or more of the stocks, I think the YieldMax ETFs are a good way to invest.