"The YieldMax MSTR Option Income Strategy ETF (NYSEARCA:MSTY) has been a falling knife of sorts so far this year, now with a year-to-date loss of 44%. Undoubtedly, the stock chart doesn't look all too great, but with one of the largest distribution rates out there, currently sitting just over 92%, some brave dip-buyers who buy into the strategy may wish to keep on buying up the shares as prices continue to sink lower."
"If the distributions paid out exceed the pace of capital depreciation, investors in shares of MSTY could walk away as winners. Undoubtedly, the MSTY, or just about any ETF offered by YieldMax, isn't like your average equity ETF. In fact, it's an active ETF that doesn't own shares of Strategy (NASDAQ:MSTR) directly, but uses synthetic covered calls to fund the towering distribution."
MSTY has a 44% year-to-date loss while yielding just over 92%. The ETF is active and uses synthetic covered calls rather than holding MicroStrategy shares directly to generate the distribution. The fund's distributions are funded by options strategies and produce a near-100% yield. MicroStrategy is an analytics software firm and the largest corporate holder of Bitcoin. High volatility and capital depreciation raise the risk that distributions may not offset share-price declines. If distributions exceed capital losses over time, shareholders could net positive total returns. Prospective buyers must assess confidence in MicroStrategy and tolerance for extreme volatility before buying on dips.
Read at 24/7 Wall St.
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