Summary The YieldMax MSTR Option Income Strategy ETF offers a headline 100%+ yield, but this is largely unsustainable and primarily funded by return of capital. MSTY consistently underperforms MSTR during rallies while only marginally mitigating downside, making it unattractive compared to direct MSTR exposure. Recent dividend reductions and high return of capital indicate the payout is shrinking and not supported by true income generation. I maintain a Hold rating on MSTY, as upside is capped and downside protection is minimal; direct MSTR ownership is preferable if bullish. The YieldMax MSTR Option Income Strategy ETF ( MSTY ) is liked by some investors for its high dividend yield of 100%+, which it partially achieves by generating income from Strategy ( MSTR ) options. But oftentimes, if something seems too good to be true, it is. On February 27, I wrote about the MSTY ETF, and the article was titled "MSTY: 100%+ Dividend Yield, But There's A Catch." In that article, I highlighted several risks to note for investors considering a position in MSTY. Those risks included BTC potentially falling by another 10%+ (which is what it did shortly after the article was published), the potential for smaller dividends over time, Strategy's premium over its mNAV, and the fact that MSTY can underperform when MSTR performs very well but still capture a lot of the downside when MSTR performs badly. I think it's safe to say that those things have played out. The price of Bitcoin ( BTC-USD ) was around $84,000 when I wrote that article and is actually a bit higher now at around $89,000. However, MSTY's total return since then -- which includes dividends -- has been -30.27%. A lot of this has to do with MSTR's poor performance and mNAV premium erosion lately. MSTY's Performance Since My Last Article (Seeking Alpha) At the same time, MSTY's dividends have shrunk considerably. The only reason the yield is still high is because the share price has fallen. So, what's next? While MSTY is surely a much better Buy now than it was a few months ago, I still don't think this is an investment vehicle worth pursuing -- compared to MSTR stock -- for the long term for many of the same reasons as before. This is despite me not being bearish on BTC. Therefore, I'm staying on the sidelines with a Hold rating. A Brief Overview of MSTY's Strategy MSTY indirectly invests in MSTR stock. Its main goal is to generate income, and its secondary goal is to capture the share price movements of MSTR stock. I went over MSTY's strategy in my last article on the ETF, and I suggest reading that for more context, but here's a refresher. Previously, I wrote: MSTY is an options-based ETF. Instead of buying MSTR shares, MSTY gains its exposure to MSTR through the purchase of call options. To help finance these purchases, MSTY also sells puts on MSTR. The fund doesn't just sell puts, though. Particularly, the fund's prospectus states the following: On a monthly basis or more frequently, the Fund will sell call option contracts on the Underlying Security with expiration dates of approximately one month or less in the future at strike prices that are approximately equal to 0%-15% above the then-current share price of the Underlying Security. And when MSTY's management team is more confident that MSTR stock will rise, it can choose to employ a call credit spread (which it calls a covered call spread strategy) instead of covered calls to seek greater upside potential. Further, the fund invests in US Treasuries with target maturities of 6 months to 2 years. Its 6 main types of holdings can be seen below. MSTY's Portfolio Strategy (MSTY's Prospectus) MSTY's Prospectus MSTY ETF's Performance Problem MSTY's strategy leaves it with a performance issue. It tends to underperform greatly when MSTR stock rallies, and it still captures a lot of the downside when MSTR does poorly. That's because its covered call and call credit spread strategies limit upside potential. I'm sure most readers of this article are familiar with these options strategies, so I'll spare you the details. The strategies may sound great on the surface (generating income from MSTR's volatility), but they often just don't do that well. Here's how MSTY has performed compared to MSTR -- dividends included. In the chart below, the candlesticks represent MSTY, while the bars represent Strategy stock. Since its inception in February 2024, MSTY has returned 102.4%, while MSTR has returned 151.8%. You can also tell how much better MSTR's outperformance is during bullish periods. MSTY's Performance vs. MSTR's Performance (TradingView) Here's another thing to consider. During the most recent drawdown starting in July, MSTY has fallen by 55.6%. MSTY's Performance Starting From July 18, 2025 (TradingView) At the same time, MSTR has fallen by 60.4%. MSTR's Performance Starting From July 18, 2025 (TradingView) Sure, MSTR performed worse during this period, but not by much. The income generated from MSTY's options strategy only spared the fund a few percentage points of drawdown while sparing it many percentage points of upside during good times. That's quite the opposite of a strategy I'd want to be exposed to. The Dividend Problem The YieldMax MSTR Option Income Strategy ETF has a variable dividend that can fluctuate greatly. When I wrote my previous MSTY article, the most recent dividend was $2.0216 per share, paid 13 times a year, for an annualized dividend of $26.28 per share. Of course, that "annualized" dividend would only come to fruition if the dividend held steady, which it didn't. I previously noted that factors like implied volatility and MSTR's stock price can impact the dividend. All else being equal, a higher MSTR stock price and higher implied volatility for its options will lead to greater premiums, which can help sustain the dividend. The same principle applies if MSTR and its IV fall. Since the implied volatility was low and the stock price had fallen in February, I argued that the March distribution could be lower. The March distribution then came out to $1.3775 per share -- a big drop. All the dividends after that, except a $2.3734 per share dividend in May, were much lower than February's dividend. It's worth noting that the fund started paying its dividends weekly in October. MSTY's Dividend History (yieldmaxetfs.com) And for reference, volatility in Strategy's options chain is at around the same level as it was in February, but it had dropped off in a big way in the middle of the year. Strategy's Historical Volatility (Interactive Brokers) There's also another thing that affects MSTY's dividends -- the amount of money it has invested. Here's the problem, though: MSTY has been using "return of capital" ((ROC)) to fund large portions of its dividend payments since May. You can see that in the "ROC" section of the chart above. For example, 92.88% of the most recent dividend of $0.1388 per share came from a return of capital, meaning that only about 7% came from income the fund generated. This isn't true income. It's just the fund giving your money back to you. The less money the fund has (because it's just giving you your money back), the less it can invest, and the less income it will make. This certainly doesn't help the dividend. So, yes, the fund yields over 100% right now if you annualize the most recent dividend, but that's not a guaranteed dividend. It depends on several factors. The annualized dividend right now is around $7.22 per share. Recall that in February, it was $26.28 per share, and some people were bashing me for not being bullish despite a high yield. However, I do recognize that the dividend can increase from here if MSTR stock recovers. But as we've seen, MSTY tends to underperform during upswings. If you're bullish on MSTR, you might as well buy MSTR then, not MSTY. At Least Bitcoin is Well Off Its Highs The MSTY ETF has something going for it. Bitcoin is well off its all-time high and is close to a trendline support area. Bitcoin can potentially bounce back, helping Strategy stock recover, which would then help MSTY. BTC-USD Daily Chart (TradingView) Even the CMC Crypto Fear and Greed Index shows that the crypto market is in fear territory (21 out of 100), and buying when the market is fearful can sometimes translate to nice gains. CMC Crypto Fear and Greed Index (coinmarketcap.com) Strategy's Premium to mNAV Has Eroded Strategy stock's premium to its mNAV used to be much higher, sometimes above 2x or 3x. It's now 1.16x. To be honest, I don't even think it should be trading above mNAV, and I prefer the ETH treasury company SharpLink Gaming ( SBET ), but that's another argument for another article. The point is that the downside risk at 1.16x is much lower for MSTR and, in turn, MSTY. Strategy's Premium To mNAV (strategy.com) Therefore, one can make the argument that MSTR is relatively cheap, making MSTY worth buying. But at that point, why not just buy MSTR? The Bottom Line on MSTY ETF The YieldMax MSTR Option Income Strategy ETF is a great ETF if you want high dividends, but that doesn't make it a great ETF overall. In recent months, your "dividends" would mostly have been your capital being returned to you. It looks nice to receive large dividends until you realize that these dividends are getting smaller and smaller over time and will only get bigger if MSTR stock rises or if its implied volatility rises sharply. But if you think MSTR stock will rise, you'd likely see better performance buying MSTR. In a crypto bull market, MSTR stock will rise, and its premium to mNAV (which is relatively low now) would likely rise as well, amplifying the gains. While MSTY would capture some of those gains, it wouldn't capture all of them, and that's by design. You can see that play out in its past performance. In most scenarios, buying MSTY is like capping the upside on MSTR stock while barely offsetting the downside. It's just not an attractive investment, relatively speaking. Therefore, I don't suggest that anyone buy it. The main reason I don't rate it as an outright Sell is because of Bitcoin's potential to bounce back after its recent fall.
