TSLA - NVDY: Steer Clear Of This Yield Trap

2024-06-25 11:18:13 ET

Summary

• YieldMax NVDA Option Income Strategy ETF, a YieldMax product, uses a synthetic covered call strategy on Nvidia Corporation to generate income, but faces potential decay in that yield over time.
• The NVDY fund pays out option premiums as yield regardless of profitability, leading to weakening buying power for the fund's NAV.
• NVDY may be suitable for investors seeking short-term high yields or partial exposure to Nvidia, but long-term investors should avoid due to decay in yield and tax implications.
• We rate the NVDY ETF a "Strong Sell."

A few months ago, we wrote an article titled "TSLY: Good In Theory, Disastrous In Practice."

At its core, that article mainly discussed YieldMax TSLA Option Income Strategy ETF ( TSLY ), and how it wasn't suited to a long-term investor's goals of total returns or income generation....

For further details see: