MSTY’s 102% Yield Collapses Alongside Bitcoin’s Meltdown

Core Insights - The YieldMax MSTR Option Income Strategy ETF (MSTY) offers a high dividend yield, but its sustainability is questionable due to its reliance on Bitcoin's price volatility [2][4]. Income Generation Mechanism - MSTY generates income by selling call and put options on MicroStrategy (MSTR) stock, holding approximately 18% in U.S. Treasury notes as collateral [3]. - The fund's income is highly dependent on market volatility, with option premiums increasing during high volatility and decreasing when volatility contracts or the underlying stock declines [3][4]. Yield Characteristics - The trailing twelve-month yield of 102% appears attractive but masks significant instability, with distributions fluctuating between $0.14 and $4.42 [4][7]. - The recent shift to weekly payments and a distribution of $0.31 on February 6 indicates that yield sustainability is contingent on maintaining high volatility in the underlying asset [5]. Bitcoin's Impact - MicroStrategy's stock has dropped 75% from its November 2024 peak of $543 to $133.20, largely due to Bitcoin's decline of 41% from $109,358 to $64,050 [6][7]. - The company's leveraged exposure to Bitcoin creates a feedback loop, where weakness in cryptocurrency leads to significant equity losses, compressing the option premiums that MSTY relies on [6].