Summary YieldMax MSTR Option Income Strategy ETF (MSTY) advertises a 308% trailing yield, but this is driven by a collapsing NAV. The "yield" is mostly a mirage. MSTY's NAV has fallen 81% in the past year, with capital losses far outweighing distribution income, resulting in negative total returns. The fund’s high yield is at risk of further decline due to its dependence on volatile, leveraged exposure to Strategy (MSTR) and, by extension, Bitcoin. MSTY's 0.99% expense ratio and wide bid-ask spread further erode returns, making it unattractive compared to peer covered call ETFs. In this article I explain why I consider MSTY a clear sell. YieldMax MSTR Option Income Strategy ETF ( MSTY ) is a covered call ETF built upon Strategy ( MSTR ) stock. The fund doesn't hold MSTR common stock itself; instead, it indirectly gains exposure to the stock, through long calls and short puts . The combination of long calls (paying for the right to buy the stock at a set price) and short puts (being paid to sell the stock at a set price) is designed to replicate MSTR stock’s returns. On top of this synthetic long exposure to MSTR, MSTY has a second option layer, which is covered calls. If executed well, the covered calls should provide some income on top of that generated by the synthetic long book. The more volatile an underlying asset, the more valuable options on that asset become. The more valuable an option is, the higher the premiums paid to enter it. Strategy is a notoriously volatile stock, with a 3.54 beta coefficient , making MSTR 354% more volatile than the market. That kind of volatility comes with high option premiums, so it should come as no surprise that MSTY seems to have a lot of yield, reported by Seeking Alpha Quant as a whopping 308% ! MSTY dividends (Seeking Alpha Quant) In a certain sense, this ultra-high yield is “real.” Specifically, it is the fund’s trailing yield: the last 12 months’ dividends divided by today’s unit price. Below you can see a spreadsheet I made that lists MSTY's last 12 months’ dividend data from Seeking Alpha Quant and calculates total payouts. I used the data in the “adjusted amount” column to account for the fact that Yieldmax did a reverse stock split on MSTY in November of 2025 . The rightmost column sums all the numbers in the “adjusted amount” column, which work out to $68.67. MSTY now trades for $22.23, so the trailing yield is about 308%. MSTY dividend payments (The author) But there is a catch! According to Morningstar ( MORN ), MSTY’s NAV has fallen from $124.30 to $23.41 over the last year, representing an 81% decline. The fund’s price return has been even worse, with the stock having fallen from $124.30 to $22.23 in 12 months. So, the investor of last year did not collect 308% return, as that investor’s return was based on a price of $124.30 and $68.67 in dividends. His price return was -82% and his dividend return 55.24%. Therefore, an investor in MSTY lost wealth over the last 12 months. MSTY NAV decline (Tradingview) These days, MSTY is providing about $0.36 per week in distributions, which should provide an 84.4% yield if the dividends stay at that level. That seems like a lot, but it's not at all clear that MSTY’s dividends actually will stay at the current level. As previously established, MSTY’s net asset value [NAV] has been eroding over time. The lower a fund’s holdings go, the less option premiums it can earn in covered calls. Although a stock’s volatility and an option’s moneyness partially determine the premium income on that stock, its price is a bigger factor. Options on a $1,000 stock will command higher premiums than options on a $0.10 stock, even if the latter is much more volatile and near the money. So, there is a risk of MSTY’s dividends continuing to decline over time. Risk of MSTY Declining Further To understand how MSTY risks having its NAV decline and its distributions cut, we need to look at some characteristics of its underlying holding–or rather, the stock underlying its underlying holdings, which are all options. MSTY's underlying asset is Strategy, a U.S. tech company that functions mainly as a leveraged bet on Bitcoin ( BTC-USD ). The company’s operating business is tiny as a percentage of the whole: MSTR reported $54.26 billion worth of Bitcoin and $61.6 billion worth of total assets last quarter. Therefore, all of Strategy’s operating assets were at most 11.9% of its total assets. Further, Strategy’s operating business has been losing money (on an EBIT basis) since 2019 ; so whatever positive earnings this company had in that period were due from Bitcoin gains. So, Strategy is a Bitcoin proxy. This necessarily creates risk because Bitcoin is basically impossible to value using conventional valuation methods. It has no cash flows, meaning that it DCFs and earnings multiples don’t apply to it. It isn’t used in industry, so we can’t use forecasts of spot market supply and demand, as we use for commodities . Finally, it isn’t even really possible to tell how much blockchain activity is speculative vs payment-related, so there’s no telling how much of Bitcoin’s current value comes from "real world" (i.e. non-speculative) demand. It follows from the above that there is no really “limit” on how low Bitcoin can go. If investors lose faith in it, it can fall in price indefinitely; there’s no dividend coming to entice new buyers, nor a buyback to counteract the selling. So Bitcoin is inherently risky, and Strategy holds a lot of Bitcoin. That’s enough to establish that Strategy is risky. But it’s not the end of the story. In addition to being a proxy for a very risky asset, Strategy is also highly leveraged. The company has $8 billion in debt and $65 million in annual interest expenses. Interest cost (0.81%) is not very high; however, the low interest rate comes from Strategy’s bonds having conversion features. If holders choose to exercise those options then current Strategy holders will see their ownership percentage decrease. And of course, leverage, regardless of interest rate, amplifies the both gains and losses. In a market like this one, with Bitcoin falling at a rapid pace, that means that MSTR is falling even further than Bitcoin itself. MSTR debt (Seeking Alpha Quant) MSTR interest (Seeking Alpha Quant) Is MSTY’s Hedging Effective? As we've seen, MSTY's long book is extraordinarily risky. Much like MSTR, the stock it is based on, it is far more volatile than the market. For many investors, that's enough to avoid MSTY altogether. However, the fund has a certain hedging benefit to it. That's worth examining, because it could smooth out volatility. People buy covered call funds for two reasons: first, for dividend income; second, for hedging benefits. Covered calls partially offset losses in the underlying stocks; therefore, MSTY’s significant call income could be seeng as hedging against the weakness in Bitcoin and Strategy stock. That’s technically true: MSTY’s call income is in fact a partial hedge –operative term partial. Once the underlying asset in a covered call fund declines further than the fund’s premium income, then the income provides no further hedging benefits. With Bitcoin falling by high percentages in recent months, and Strategy stock falling even further, the premium income would appear to have little effect in hedging against downside. Indeed, as I showed in a previous section, MSTY’s total return factoring in both dividends and capital losses has been negative over the last year. Fees, Bid-Ask Spread and Other Costs Before concluding, we need to look at some of the “nuts and bolts” aspects of MSTY, such as its management fee and bid-ask spread. MSTY’s gross expense ratio is 0.99%. The fund literature provides no indication of anything offsetting these fees, so the management expense ratio [MER] is likely 0.99% as well. 0.99% is a very high fee by ETF standards. Broad market funds, such as the Vanguard S&P 500 Fund ( VOO ), have fees as low as 0.03% . JPMorgan’s ( JPM ) industry standard covered call funds charge 0.35% . So, MSTY is more expensive than both the wider markets and its peer funds. MSTY’s bid-ask spread is 0.04% . This is much wider than the spread on broad market funds like VOO (0.01%) and other covered call funds like JEPI ( 0.02% ). The bid-ask spread is another kind of hidden fee, as it’s the amount that market makers pocket when trading stocks and ETFs for you. The Bottom Line The bottom line on MSTY’s eyebrow-raising 308% yield is that it is largely a mirage brought on by the fund’s declining NAV. If you calculate MSTY’s yield user the year ago price and trailing 12 month dividends, it is more like 55%, and the fund’s capital losses have been greater than that. In other words, the fund has been a long term loser. Further more, MSTY’s dividends have been declining, and will likely decline further over the long term if Bitcoin and Strategy keep declining in price. Taking all of this into account, I’m happy keeping my money very far away from MSTY.
