NVDY ETF

YieldMax NVDA Option Income Strategy ETF offers high distribution yields by selling short-dated, slightly out-of-the-money calls on NVIDIA, but its attractiveness depends on NVIDIA's volatility. The distribution rate has dropped from 106.86% to 67.78%, reflecting changes in call premiums due to NVIDIA's volatility and market demand. Selling covered calls on NVDA can be challenging, and while it offers income, it limits upside potential and doesn't significantly reduce downside risk.

YieldMax NVDA Option Income Strategy ETF offers high dividends but caps upside, underperforming NVIDIA during rapid price increases. The ETF uses covered calls and credit call spreads to generate income, benefiting in sideways or slightly rising markets. NVDY's yield is attractive but inconsistent, tied to NVIDIA's volatility, and has underperformed NVIDIA's total return since inception.

YieldMax, an ETF issuer known for its option income strategies, rolled out its 36th fund today. The YieldMax Target 12 Semiconductor Option Income ETF (NYSE Arca: SOXY) is an actively managed product that writes options on the holdings of a portfolio of between 15 and 30 semiconductor stocks.

The NVDY ETF offers high income by sacrificing NVDA's upside potential, and has achieved impressive returns since its inception. The pattern of monthly NVDA returns has been especially accommodating for NVDY's structure, but I don't expect that to continue. Nvidia Corp itself remains a reasonable portfolio holding for patient long-term investors.

The YieldMax NVDA Option Income Strategy ETF offers a high dividend yield of 72%, providing income investors exposure to Nvidia's growth without directly buying the stock. NVDY employs an options strategy, buying and selling call options and selling put options on NVDA, while also investing in US T-Bills for collateral and extra income. NVDY has delivered a strong 1-year total return of ~91%, with initial investors recouping their investment through 118% in cumulative distributions since its May 2023 inception.

NVDA remains strong despite tech in-sector shifts, with a bullish long-term trend and upcoming Q3 earnings report expected to show significant growth. NVDY, a covered-call ETF on NVDA, has performed well, offering attractive yields and mitigating downside risk during NVDA's weaker periods. NVDA's implied volatility is lower than in August, but I still assert that NVDY is a compelling buy ahead of NVDA's earnings and potential seasonal weakness in shares of NVIDIA.

YieldMax NVDA Option Income Strategy ETF generates high income by trading options on Nvidia stock, offering up to 55% annualized yield. NVDY employs synthetic covered calls and credit call spreads, benefiting from Nvidia's volatility to maximize option premiums and distribute monthly income. NVDY's 145% total return in the past year highlights its income-focused strategy, though it differs from NVDA's growth-oriented approach.

Nvidia Corporation is not a stock I normally look to for my main dividend portfolio, but the chart picture is such that I did so indirectly, via the covered call YieldMax NVDA Option Income Strategy ETF. But the driver to that decision was my analysis of NVDA, from a technical, sentiment and quantitative standpoint, as detailed here. My core approach involves “portfolio engineering” to maximize returns and minimize significant losses, diverging from traditional buy-and-hold strategies. This is the latest example.

Option selling, while popular for higher income, is often misunderstood and carries significant risks. YieldMax NVDA Option Income Strategy ETF uses synthetic long positions and options strategies to generate income. We explain the option strategy involved and why this gets a big upgrade over a direct Nvidia investment.