Can You Really Earn a 100% Yield From This Tesla-Based ETF?

A wave of funds has popped up promising double-digit income yields, many of them built on familiar covered call tactics. But one issuer, YieldMax, has taken the concept to an entirely different level. Think 30%, 50%, even 100%-plus yields.

The poster child is the YieldMax Tesla Option Income Strategy ETF, ticker TSLY. This fund aims to milk income from Tesla (NASDAQ: TSLA) by trading options, and based on the last 12 months of payouts, it’s been yielding north of 120%.

Sounds almost too good to be true, right? That’s because, well… it sort of is.

Key Points

• TSLY income strategy relies on selling calls and puts, backed by Treasuries.

• Tesla rose ~92%, but TSLY fell ~78% due to capped upside and downside exposure.

• The fund thrives in tight ranges, but Tesla’s volatility makes that unlikely.

How TSLY Generates Monster Yields

At first glance, you might assume a Tesla-focused ETF would be loaded with Tesla stock. Surprisingly, that’s not the case. In reality, most of TSLY’s assets sit in U.S. Treasury securities.

Treasuries are used as collateral to support the fund’s main strategy of buying and selling Tesla options. These include call and put contracts, some long, some short, hovering around the stock’s current price.

For instance, as of the latest holdings report, one of the largest non-Treasury positions is a batch of Tesla call options expiring in July 2025, with a strike price around $340. The entire portfolio is actively managed to create the most income possible, given the risk the fund is taking on.

This isn’t a passive ETF. It’s more like a high-wire act, designed to crank out monthly payouts at the cost of big moves in either direction.

But What’s the Catch?

Here’s where the rubber meets the road. First, the dividend payments aren’t consistent. In the past year, TSLY’s monthly distributions have swung wildly, from as high as almost $1.30 per share to about 75% lower. That’s a lot of volatility for something marketed as an income play.

More importantly, the ETF’s total return has been shockingly poor, despite the sky-high yield. Since launching in late 2022, Tesla stock has climbed nearly by over 90%. TSLY, on the other hand, has dropped just shy of 80%. The gap is staggering, and yes, the fund already went through a reverse split to manage that drop.

How is that even possible? When Tesla stock surges, TSLY’s option positions act as a drag. The covered calls it sells cap the upside, which means the ETF misses out on big rallies. And when Tesla falls, the fund takes losses on the puts and short calls it holds. It’s a lose-lose scenario if the stock doesn’t stay in a tight range.

In short: the fund thrives when Tesla goes nowhere. And if you’ve looked at a chart of Tesla’s price history, you know that’s not exactly its style.

So Is TSLY Ever a Good Idea?

In fairness, there is a niche scenario where TSLY can shine.

If Tesla stock trades sideways, staying stuck in a relatively narrow band, for an extended period, this ETF might outperform a buy-and-hold strategy. The constant churn of option premiums could add up nicely in that case.

But if Tesla does what it usually does, yo-yo up and down or make big directional moves, TSLY’s strategy backfires. And history suggests that betting on Tesla to sit still is… optimistic.

Even more telling: since its launch, TSLY’s total return including dividends is about 26%. Tesla stock, by comparison, has returned more than double that in the same period. For all the flash of a triple-digit yield, it hasn’t translated into stronger results for investors.

The Bottom Line

TSLY and other YieldMax ETFs offer an enticing pitch. Sky-high monthly income from stocks you know. But that income often comes at the cost of total returns, and sometimes, that trade-off isn’t worth it.

If you believe Tesla’s next move is no move at all, and you’re OK with a complex, options-driven strategy, then maybe TSLY belongs in your portfolio. But for most investors, sticking with the stock itself might still be the more rational choice.