MSTY, LFGY, & PLTY: What You Should Know Before Buying YieldMax ETFs

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The word is spreading like wildfire. Some of YieldMax’s exchange traded funds (ETFs) offer huge annual distribution yields, and legions of passive income investors are loading up on these intriguing funds.

Today, we’re putting three YieldMax ETFs with eye-catching yields under the microscope. These are risky funds, and it’s not wise to YOLO (You Only Live Once) your entire investment account into these ETFs. Still, they have enticing benefits for yield seekers and may be appropriate for small position sizes in your portfolio.

YieldMax MSTR Option Income Strategy ETF (MSTY)

Sometimes, investors with a bullish outlook on Bitcoin (CRYPTO:BTC) will buy shares of Strategy (NASDAQ:MSTR), a software developer that holds many Bitcoins. There isn’t a one-to-one correspondence, but when the Bitcoin price goes up, the price of Strategy stock also tends to rise.

However, passive income investors may be disappointed to discover that Bitcoin doesn’t pay a dividend and neither does Strategy stock. To derive some extra income from Strategy stock, you could learn the ins and outs of sophisticated options-trading strategies — or to make it much easier, you can just own the YieldMax MSTR Option Income Strategy ETF (NYSEARCA:MSTY). 

Although the YieldMax MSTR Option Income Strategy ETF holds cash and U.S. Treasury bonds, it also indirectly generates weekly income from Strategy stock. The fund achieves this through strategies involving synthetic covered call options and synthetic covered call option spreads.

To sum it up, the YieldMax MSTR Option Income Strategy ETF may purchase call options and sell put options to synthetically simulate ownership of Strategy stock. Then, the fund may sell covered call options and/or covered call option spreads to derive income from those synthetic Strategy option positions.

These strategies tend to limit the potential share-price upside of the YieldMax MSTR Option Income Strategy ETF. Consequently, in terms of share-price performance, the MSTY ETF is likely to significantly lag behind Bitcoin and Strategy stock.

Furthermore, the YieldMax MSTR Option Income Strategy ETF deducts a 0.99% annualized expense ratio from the share price, will will also drag on the fund’s share price. Yet, the MSTY ETF currently advertises an 89.33% annual distribution rate, which may be hard to resist. Just be aware of the aforementioned share-price weakness risks, along with the fact that the fund’s distribution rate can change at any given moment.

YieldMax Crypto Industry and Tech Portfolio Option Income ETF (LFGY)

Sticking to the theme of indirect cryptocurrency investments, another fascinating YieldMax offering is the YieldMax Crypto Industry and Tech Portfolio Option Income ETF (NYSEARCA:LFGY). Like MSTY, the LFGY ETF offers weekly distributions and utilizes sophisticated options-trading strategies such as synthetic covered calls and synthetic covered call spreads.

Another similarity to the MSTY ETF is that the YieldMax Crypto Industry and Tech Portfolio Option Income ETF also deducts a 0.99% annualized expense ratio from the share price. Where the two funds start to differ, however, is that LFGY appears to be more diversified than MSTY.

Whereas MSTY indirectly focuses on Strategy stock, the YieldMax Crypto Industry and Tech Portfolio Option Income ETF indirectly provides exposure to an array of cryptocurrency-centered stocks and/or ETFs. These include the iShares Bitcoin Trust ETF (NASDAQ:IBIT), Coinbase Global (NASDAQ:COIN), Riot Platforms (NASDAQ:RIOT), and Marathon Digital Holdings (NASDAQ:MARA).

Due to its diversification, the YieldMax Crypto Industry and Tech Portfolio Option Income ETF might appear to be safer than the MSTY ETF. Yet, bear in mind that MSTY is anchored by substantial cash and Treasury bond holdings while LFGY is not.

In any case, the YieldMax Crypto Industry and Tech Portfolio Option Income ETF currently offers a hefty 80.9% annual distribution rate. Just keep in mind, though, that LFGY has similar share-price weakness risks to the MSTY ETF as well as the possibility that its distribution yield can change anytime.

YieldMax PLTR Option Income Strategy ETF (PLTY) 

Now, we can veer away from cryptocurrency-focus funds and discuss another tempting YieldMax fund, the YieldMax PLTR Option Income Strategy ETF (NYSEARCA:PLTY). As you may have surmised, this ETF indirectly provides exposure to the shares of cyber-protection software firm Palantir Technologies (NASDAQ:PLTR).

Once again, we’re looking at weekly cash payouts and a 0.99% annual expense ratio to cover the fund’s operating costs. Moreover, the YieldMax PLTR Option Income Strategy ETF holds sizable quantities of U.S. Treasury bonds like MSTY does, so this could provide some share-price stability.

Nonetheless, the 0.99% expense ratio will drag down the share price of the PLTY ETF. The fund’s share-price gains will also probably be limited by the YieldMax PLTR Option Income Strategy ETF’s options-trading strategies (synthetic covered call options, etc.).

Getting down to the nitty-gritty, the YieldMax PLTR Option Income Strategy ETF advertises an annual distribution rate of 61.91%. That’s less than what MSTY and LFGY offer, but it’s still quite high, you must admit.

All in all, the YieldMax PLTR Option Income Strategy ETF may be right up your alley if you’re optimistic about Palantir Technologies and the cybersecurity field in general. On the other hand, cryptocurrency enthusiasts may prefer to own MSTY and/or LFGY. Either way, you’ll definitely want to stay safe and keep your share position sizes small at all times.

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