Some context on why I am making this blog post - I was telling a friend about CC ETFs (covered call ETFs) tonight and I have been talking about this stuff to many friends. I thought, since there may be lots of questions and things to cover, and my opinion on it all (just a collection of things I have learned on my own), I just thought I would make a blog post about it so I can point them to reading this to save myself some time reexplaining it all, or at the very least I can reflect on this to see how things have changed, the market or my strategy or what not. Plus a great topic to write about because I am into these and still learning more about as I go along.

Some things to consider:

• This is not financial advice. I am just a retail investor giving my opinion on the matter.

• A lot of it is just research online, and mainly from other retail investors, NOT institutional or licensed advice or things found in a textbook or course.

• How much you put in, your approach and strategy on reinvesting or not, how long you plan to stay in or exit out of certain positions, all of that is entirely up to you and your risk tolerance, your financial situation, and even how the market holds at the time. I am not responsible for your gains or losses or if you overleveraged.

• I acknowledge these are high risk ETFs. At the time of writing, I am down (which I will explain in detail later), but I am a firm believer of the things I invested in for the long term, and with big price swings up may come with big price swings down. That’s what I signed up for when investing in these stocks meant for volatility. Only time will tell if I made the right or wrong move for this based on my rationale.

• I will also say these funds are not for everyone. Not everyone’s risk tolerance or financial situation is suitable for these ETFs, they’re not a big money glitch you can abuse, it’s not a free lunch but it is also (hopefully) a great way to invest in a new asset class made for retail investors. There are different ways you can go about these funds. I don’t recommend the “set it and leave it” approach for this, but you CAN do it, depending on your approach and how much you are willing to put in.

• I am putting this publicly, but I am not putting actual numbers of my own up. There are many people online who are transparent about their portfolio and good case studies out there, but I’m deciding to keep mine private. If a friend is reading this, depending on who you are, I may or may not share my full portfolio if I’m comfortable sharing it. Please don’t be offended if I decide not to share my portfolio with you. Also, one day I may make a video about it but I don’t know. For now you’ll just have to read this without any images or clips to supplement my explanations.

• Do your own research outside of this as well because this is just my opinion and what I have learned over my time investing and researching about these funds. Because a lot of this is online info, you may see what I say as an echo of what other people say. But that’s because I agree with their points.

First off, the big criticism about these covered call ETFs is that it is a dividend trap or a scam or however it may come across. I can see why especially given the little track record, but from my understanding, the way you approach these funds could be a great investment tool for you to grow your portfolio or at least give you flexibility on capital (if you are like me who find it hard to sell positions, but eager to buy buy buy).

The second criticism is if you buy the underlying, you have a much better growth potential than these derivative funds. At least for YieldMax ETFs that are based on synthetics to do their covered calls, you have capped upside (if the growth is too high too fast, depending on the spread and blows through all the strike prices you end up with a loss) and take all the downside if the price goes down. If the fund is managed correctly, theoretically you can just sit on these funds and harvest distributions while the stock stays stagnant or down. In an ideal world of course, the stock is volatile but slowly trends upward - at least for YieldMax products on their deployment of the fund strategies. They did recently announce a big upcoming change, so maybe this will change depending on what they do regarding their strategy.

Also bear with me, this may be very disorganized but I hope it all comes full circle. If it’s too confusing after reading it all, I will reexplain and answer questions or maybe make a 2nd blog post if so. But hopefully with this paired with doing external research, it will all make sense.

So that’s all the big criticism out there so far, and I hope I can kind of answer for my beliefs on why I am holding rather than selling. I’ll explain a bit about how each ETF works (at least the ones I pick) and then my approach to them because they all work differently.

So the first and the biggest position that I have - MSTY from YieldMax. This gained a lot of spotlight and attention because of the ridiculously high and strong yield when it first started out. And with that, a lot of criticism. I first got introduced to covered call ETFs through MSTY, and over the time clones came up - MSTE, MST, IMST, and so on all from other companies like Harvest or Roundhill. And of course the short funds like WNTR. I personally just stick with MSTY, but there are PLENTY of options out there with different single stock ticker focused ETFs or a collection of them or even different strategies deployed and different fund breakdowns and holdings. A new one pops up pretty much every second, but of course I am only going to talk about the ones I shortlist.

So MSTY - all the hate around this… Lets dive right in. This fund is purely based on MSTR, or MicroStrategy or Strategy (renamed to this). MSTR is a leveraged bitcoin vehicle. What this means is, they keep buying bitcoin, and 1. they are doing it no matter the cost and 2. they are doing it based on either long term convertible debt at low to zero interest rate, or through raising capital through stocks, and they do this in many ways like STRK or other things they do with MSTR, which I don’t really have a good grasp on, but maybe this video (https://youtu.be/O_WjH0mqKww?si=eg8t67X_XhOgnstb) can help (its honestly not the BEST video because it doesn’t include a lot of key important things, but its a great way to get started and explain it all to you hopefully) Michael Saylor (the CEO of MSTR) talks a lot about bitcoin and he’s basically a bitcoin preacher and important figure in the bitcoin community, he makes a lot of appearances so there’s plenty of videos that I’ve digested here and you can find plenty of.

But MSTY was made because MSTR is so highly volatile, and the theory is as long as bitcoin exists, MSTR exists, and therefore MSTY exists. The holy trinity diagram has even popped up a couple times. It’s this venn diagram of MSTR/MSTY/BTC and what they all serve as a purpose for. So MSTY’s strategy thrives off volatility. They get a higher premium on their contracts based on the implied volatility (IV) of MSTR, I believe the 30 day forward IV (because MSTY pays every 4 weeks I guess?). Lately they have been paying out more than the IV as they laid out on the prospectus (they target to pay distributions for the IV, which lets say is $0.5-$0.6. They only generated maybe a total of $0.70, factoring in their synthetic income, extrinsic income, weekly income combined. After all this, they paid out $1 a share anyway). I think this is a marketing move, they took it straight out of the Net Asset Value (NAV) of the fund to pay out as a return on capital, and then that way people don’t panic sell. But the backlash is, they should try and preserve the NAV (which matters for us for total return because total return is based on both the gains/loss on share price and the distributions (dividends) collected). Some people see only the gain/loss on share price without factoring in the dividends, some people think return on capital is just that - returning you your own money back. But in my opinion, and I believe this may be the general consensus, is that the “return on capital” is just a way to help with taxes because ROC is not taxed as it would actual dividends. I want to crush this critique because I know people who are up on their position because their entry, paired with the time that they held, made their position stay in the positive despite the tank in share price. People who bought at $17, during the tariff wipe in March/April, have collected so much distributions that the price now (around $14) are still positive when factoring in the distributions they collected over the months. Of course, if you bought at $17 a couple months ago, you would not be in a better position than if you bought at $17 earlier this year, because the time you collected dividends matter. Also, if you bought at $20 inception, you already hit house money at this point, I think 1 to 2 months ago. So those people who bought it when it came out are chilling on house money status. If you are like me who kept reinvesting their distributions to increase their share count and try to snowball the monthly income, my average position is now $21.50 which of course I am net down. It’s a race against time for me - I am trying to collect enough so that I collect back what I initially invested in, and any distributions after that is “house money”. I don’t do this approach with the other funds because they are different in nature, which I will get to when I explain those funds and how they work.

For me, I believe MSTR will stick around for the long term because of bitcoin, and how they are a hedge against fiat and centralized currency, or the fact that it’s limited in supply, and basically institutions have been on a race to rack up bitcoin supply as much as possible, doing so silently and behind the scenes. Even the government is and making policies in advocacy for bitcoin. And with this, MSTY should theoretically stick around for the time being as well. “The fund will go to zero eventually” We’ve seen MSTY, and other CC ETFs under YieldMax, recover their price. Of course, in Sept we hit the lowest of the low points, even lower than the tariff season, but things have been recovering through October (hooray Uptober) so lets see how it goes. Also, MSTY was (once) a $6 billion Assets Under Management fund, now it’s around $4 billion AUM. I don’t think a fund in that capacity will go straight to zero overnight. If anything, there will be blatant signs of that happening… I also do see criticism that governments buying and institutions buying bitcoin defeats the purpose of it being decentralized currency, because back then bitcoin was meant to be anti-control. But look - just because the government buys bitcoin doesn’t mean they set the rules of bitcoin. They don’t set interest rates on bitcoin like they do with actual currency. They don’t increase the supply of bitcoin. They are just buying into their strategic reserves, I’m guessing in hopes that other countries will adopt eventually and will be a viable commodity just like how the US dollar is a universally accepted currency. As Saylor puts it, Bitcoin is the next energy, it’s digital energy and we will eventually rely on digital energy for our everyday transactional use

Enough about the bitcoin and MSTR tangent, all in all, that’s pretty much the reason why MSTY is great - it should theoretically harvest the volatility and in turn pay us out each 4 weeks. In an ideal situation, lets say the MSTY spread is MSTR $350-$380 and the contracts expire Friday, then we want MSTR price to be $349.99 for those contracts to win. Of course, as Jay from YieldMax says in an interview, UPSIDE is good for the fund. We want the upside as much as possible. So a slow steady climb up right below the capped point is ideal. Also, a cool thing about MSTY - it’s not supply and demand. People buying or selling does not affect the share price, it’s purely tied to MSTR’s price and their movement. This may be outdated if they change their strategy, which I will explain later when I get into ULTY, but this is current information at time of writing. Theoretically as well, MSTR will outperform MSTY. That’s just the way it is. But with MSTR, I don’t have to worry about when to sell, when to buy because it may cycle down or keep going up, I don’t know. The idea with MSTY is I only decide whether to buy more shares, or use those dividends to enjoy, or buy other shares of other things. And even in a downturn, it should theoretically also generate income. I am putting theoretically for a lot of this because things can happen that don’t happen in the ideals explained. I don’t plan on exiting anytime soon, the first goal is obviously house money, and I don’t see any signs of reason to sell because the downturn (although frightening and did test my conviction) is “expected”. Just going to keep collecting distributions and reevaluate my strategy.

EDIT: Funny enough, at time of writing, BTC is ATH at $125,349.92 LETS GOOO. I’m loving uptober.

Next - ULTY. I did get someone on this rather than MSTY, so maybe this fund may be a better fit for some that don’t really stomach risk. Hopefully you understand MSTY, because ULTY sort of does the same thing except for… well a good considerable difference:

1. they actually HOLD the companies they are trading off of, so there’s some downside protection there. And I’m not that much into looking at ULTY in close detail, so I’m not sure how their upside works.

2. They trade 15-30 of the most volatile stocks at the time. So instead of MSTY purely in MSTR, ULTY holds 15-30 companies and trades off them to harvest option premiums and then distribute to us.

3. they are a weekly payer. MSTY is a 4 week payer. This can snowball way quicker considering the compounding terms are shorter.

4. Its dividends (so far) have been way more consistent than MSTY. Since it switched to weekly in around end of March if i recall correctly, its paid out between $0.09 to $0.10, hovering around 80-85% yield at $5.15-$6.15 a share. Compared to MSTY (when I got in at December 2024) its averaged only $1.60 a share for me in my time collecting, ranging anywhere from $1.0105 to $2.37.

So MSTY is way more inconsistent, and of course the price swings. Buying point matters for MSTY as I explained - if you bought low a long time ago, you are in a much better position than if you bought high a long time ago, and if you bought low recently. Also, if you decide to reinvest, be prepared to see price swings. You can’t really time it because no one knows where this is headed. All you have to do is bet on it paying out for the long term and making back your initials as quick as possible so you can collect free distributions after that.

With ULTY, the price is a lot more stable* than MSTY. Of course it’s subject to bigger price swings than other covered call ETFs, and with it being a lower share price than MSTY, each cent matters depending on how large of shares you have. But for this, I have been (at the time of writing) been reinvesting distributions and contributing my income into this. I stopped buying MSTY (i ramped up to a good amount of shares for this and decided to just collect distributions from here on instead of overextending my portfolio allocation). The goal of ULTY is so it covers my monthly expenses so anything else that I receive is just bonus money.

Next, HHIS. this is essentially the same thing as ULTY but more safe? I don’t really know how this fund works exactly, other than its from Harvest rather than YieldMax, it has been paying $0.25/mo or ~25% yield every month (compared to ULTY weekly 80-85% yield), and the best part - HHIS is canadian, so no non-resident withholding tax from not being a US resident. MSTY and ULTY you will get taxed 15% for being a foreign investor (at least for Canadians). It’s a safer route than ULTY is what I can say for it, and I will be using most of my MSTY distributions to funnel into this while I also buy ULTY alongside. So HHIS is basically my “preservation of capital” whereas MSTY will be my income generator, and ULTY will be my expenses cover-er (of course allowing for a bit wiggle room too just in case).

Next - NVDY. this is like MSTY but around Nvidia. I don’t reinvest here or sell. I just use these dividends to buy other positions, and try to just break even quick and collect forever (because I don’t plan to sell out of this ever). It’s my smallest position, but I’m okay with just a fun amount into this. And surprisingly, this is very well in the green for me in terms of total return, so I’ll take it.

Oh and 1 last disclaimer with MSTY/ULTY/NVDY/other YM products - their schedule is Wednesday declaration (they announce the divs, around 6:55 am EST), Thursday is ex-dividend date (at 4pm EST is the last time you can be eligible for the distributions) and on Friday you will be paid out for those shares you held by Thursday ex-div date. The price of the ETF will drop BY that amount +/- the movement of the underlying. So lets say MSTY, at $20, pays $2, it will drop to $18. On that Friday, if MSTR goes up 5%, MSTY will go up, say 2% or $18.50 or whatever (rounded numbers).

On Sept, we saw a double whammy - paid out $1.01 on a $16 or $17 dividend (I cant remember) and then MSTR also tanked hard (possibly attacked by shorters who try to get a good entry before uptober). So we saw Sept drop DRASTICALLY but since Oct at time of writing, it’s been going up. Slowly but surely just like after the tariff wipe.

I eventually will store away my money into VFV, BTC, and other investments later down the road (I have barely contributed into these since my journey into investing into these dividend ETFs) and those are great stores of value and growth. But for now I love the flexibility distributions offer and I believe it’s an alternative (yet new) way to grow your portfolio on top of the flexibility. As long as you know how to use them to your advantage.

Great resources to learn more:

Youtube - Retire on Dividends - Analyzes intra-day trades of MSTY, other YieldMax products, and comparisons to other MSTR derivative funds - Guesses (and pretty spot on at most times) for distributions - Options trading - His singing and CONY head impression

Youtube/Blossom - Paul Santori - Canadian investor with a huge focus on cc etf’s - 400k+ portfolio generating 120k yearly income (just last year only around 85k yearly income) and extremely diversified portfolio, so if one does fail, he can rely on the rest. Nothing is no more than 12% according to his blossom (verified) portfolio. - Great case study and advocate of CC ETFs, with a wide range of selections

EDIT 10/06 - He just came out with this quick little video, which sums up a chunk of what I explained above. In case my explanation is confusing, his is definitely clearer XD https://www.youtube.com/watch?v=i28sIsvZs8U

Youtube - MarcosMilla or MrToddAkin or Spencer Invests - Also CC ETF advocates - Todd advocates for using margin to leverage your cc etf plays, I don’t recommend it but if you do it right, maybe you can get away with outperforming the margin conditions to your advantage)

Reddit - r/YieldMaxETFs (r/dividends you will see hate on the “yieldmax bros” here and yes there are some people who will be misrepresenting YM because they are kinda irresponsible investors or people making weird ass posts or hype driven misinformation, but if you can distinguish them, you may find good insight here from other investors, especially big whales that reside on this sub)

I guess I will end off by saying you can do the “VOO and chill” or “just buy XEQT” method and retire at 59.5 or 65 or whatever with $2-3 million and just withdraw using the 4% rule or the rule of 25 or whatever it may be, OR you can just use a 400k portfolio NOW and use the dividends to hybrid a snowball/expense payoff/income supplement/emergency fund at, well however long it takes you to get there. I have a clip that explains this better from Paul Santori but yes it’s great for those who have a hard time selling and only buying (you resist selling because it can go up more, or go down more, whereas with dividends you just worry about where you want to spend that money), or if you are in between finding jobs or expecting unemployment, whatever the reason may be - I wish the best in your investment journey no matter what avenue you take. We are all here to try and make money and survive in a world where the richer keep getting richer and the middle class is diminishing and pushing into the lower-middle class. I may get hate or “I told you so these funds suck” but this is the risk i’m willing to take and if it gets blown through, at least I tried, I could have played a safer route but I guess that’s a concern for future me if things go south. Just going to stick with my plan and have conviction. If you only invest what you are comfortable with into these funds, which goes for anything really, you should be fine. I personally may be quite overextended but I am working toward diversification now and if these investments get blown through, then so be it… It will sting if it does but I just have stupid stubborn faith in these… Hope I can read back on this and be glad I took the risk.