MSTY: Look Beyond The Yield

Core Viewpoint - The Yieldmax MSTR Option Income Strategy ETF (MSTY) is viewed skeptically due to its high distribution yield being a reflection of the underlying MicroStrategy Inc. (MSTR) stock's volatility rather than a systematic investment strategy [1][18]. Fund Overview - MSTY is an actively managed ETF that aims to generate monthly income by writing call options on MicroStrategy stock, having accumulated over $400 million in assets under management since its launch in February [2][5]. - The fund charges an expense ratio of 0.99% [2]. Fund Performance - Since its inception, MSTY has paid over $12 per share in distributions, yielding an annualized 105.3% based on the latest monthly distribution [5]. - The fund has returned 82.5% since inception, underperforming MSTR shares, which returned 103.0% during the same period [8][9]. Volatility and Strategy - MSTR stock has a high implied volatility of 94%, which contributes to the high distribution yield of MSTY [5][6]. - The strategy involves creating synthetic long positions and selling weekly options to earn premium income [3][4]. Tax Implications - Approximately 60% of MSTY's distribution is classified as net investment income, leading to current income tax liabilities for investors, unlike direct investments in MSTR shares [10][13]. Investment Considerations - Investors in MSTY should have a bullish outlook on MSTR shares, as the ETF's performance is closely tied to the underlying stock's price movements [9][18]. - The ETF may be more favorable in scenarios where MSTR shares trade sideways with high implied volatility, allowing MSTY to potentially outperform [14][15].