YieldMax’s NVDY limits upside exposure by selling monthly call options, capping returns during NVIDIA’s sharp rallies.
The YieldMax NVDA Option Income Strategy ETF (NVDY) has captured just 56% of NVIDIA’s 62% trailing-year gain, underperforming during periods of rapid appreciation. The fund sells monthly call options on NVDA to generate income, capping upside potential for shareholders.
NVDY holds 20.6% of assets in U.S. Treasuries as collateral, 11.5% in NVIDIA stock, and uses options to create synthetic exposure. When NVDA rallies sharply, short calls limit gains, while sideways or slow upward moves allow the fund to retain premiums as distributions.
Distributions from NVDY are taxed as ordinary income, unlike NVIDIA’s long-term capital gains treatment, adding a tax consideration for investors.