Dogfight: Tesla Covered-Call ETFs One v. One

Investing Strategies

During my time as a fighter pilot, a one-versus-one dogfight was one of the most challenging types of flights. This type of mission pitted one pilot’s skills against his opponent. This air combat training was not the type of flight in which you wanted to come home second best.

The new category of single stock covered-call ETFs now has two sponsors offering competing funds covering the same underlying stocks. This type of ETF is new in the market, with the oldest funds operating for just over a year. Many have track records that are only a few months in length. The funds have been trading long enough to compare returns for covered-call ETFs with the same underlying stock. This week I want to compare the two Tesla Inc. (TSLA) covered-call ETF returns since November 1, 2023.

United States Air Force F-16C in flight

The YieldMax ETFs were the first mover with this type of ETF, launching their first funds in November 2022. Currently, YieldMax offers 19 single-stock ETFs, with more on the way. These funds have caught the attention of investors with eye-popping distribution yields.

The six Kurv single-stock covered-call ETFs launched at the end of October 2023. These funds have lower distribution yields, but the stock price charts for the last five-plus months have generally positive slopes. Today’s underlying stock is an exception.

With at least a few months of track records, I want to compare the returns of the YieldMax and Kurv funds covering the same stocks.

The current quoted yield for the YieldMax TSLA Option Income Strategy ETF (TSLY) is 55.13%. Since November 1, the TSLY share price is down significantly, dropping by 33.9%. TSLA declined by 13.9% over the same period. TSLY paid $6.49 in dividends to add 29.2% to the starting share price. A little math gives a total return of minus 4.7% since November 1. TSLA shares underperformed the YieldMax TSLA covered-call ETF. You would expect a covered-call strategy to outperform when the share price goes down and it worked out that way for TSLY.

The Kurv Yield Premium Strategy Tesla (TSLA) ETF (TSLP) shows a current distribution rate of 25.27%. That’s over 50% less than the current yield quote for TSLY. From November 1 through May 8, the TSLP share price declined by 17.7%. Over the period, TSLP paid $3.06 in dividends. The dividends earned add 12.5% to the initial share value, giving a total return of minus 5.2%.

Although it’s apparent from the distribution yields, the two fund sponsors take different paths to picking call options strike prices, the total returns for the period in question are quite close.

I have now written up performance dogfights for all six of the Kurv funds, matching them against their YieldMax counterparts. There have been four ties, one clear Kurv win, and one clear YieldMax win.

Click on my name at the top of this article (or right here) to quickly find the other five articles. I will also track comparisons over the longer term. That information will be shared with subscribers of my ETF Income Edge service – join below!

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