"ULTY is an actively managed ETF that generates income from a portfolio of covered call strategies. Many investors turn to broad market ETFs because they can be a way of minimizing risk. ULTY does not fall into that category. As of this writing, in the past month, ULTY shares have declined by almost 12%. Year to date, they're down about 45%."
"Investing in an ETF like ULTY isn't for the faint of heart. ULTY's strategy is to sell call options and collect a premium for doing so. But in turn, the fund gives up the potential for gains above a certain level. Also, ULTY's high distribution rate is a draw for many investors. But when a fund like ULTY has to pay out more than it earns, it can cause a major decline in its share price."
YieldMax Ultra Option Income Strategy ETF (ULTY) uses covered-call strategies to generate income by selling call options and collecting premiums. The fund sacrifices upside beyond strike prices in exchange for income. ULTY offers a high distribution rate, which attracts investors seeking yield. Periods when distributions exceed earnings can pressure share price and reduce net asset value. Recent declines in several underlying holdings have further lowered ULTY's share price, producing large short-term losses. The ETF's active, income-focused approach entails higher risk and volatility compared with broad-market ETFs, requiring investors to accept potential capital decline.
Read at 24/7 Wall St.
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