Another Covered Call ETF Lands – But Is It Any Good?

Income Investing
by Tim Plaehn
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Over the last year, the YieldMax single-stock covered call ETFs have been one of the hot, high-yield investment stories. Since November 2022, the fund sponsor has rolled out an increasing number of ETFs tracking covered call results on individual stocks. With distribution yields up to 80%, it’s unsurprising that these funds excite investors.

Now, a couple of new funds out of YieldMax have caught my attention. Let’s take a look at whether they’re worth your time, big numbers or not…

ETF written on blocks on a background of money and a computer

Initially, there were five YieldMax single-stock covered call ETFs. Currently, the number is up to 18, and the sponsor has a prospectus out listing another 11, which I am sure will soon be trading in the market.

The ETFs initially covered popular tech stocks such as Tesla, Microsoft, Apple, Meta, NVIDIA, and Amazon. Recent additions to the lineup include stocks from other sectors, such as Exxon Mobil, JP Morgan, and Moderna.

You can find the complete list of current YieldMax ETFs here: https://www.yieldmaxetfs.com/our-etfs/

I recently noticed that the fund sponsor now offers two “funds of funds” that include a number of the single stock ETFs into a single fund.

The YieldMax™ Magnificent 7 Fund of Option Income ETFs (YMAG) holds an equal-weight portfolio of YieldMas funds covering the popular Magnificent Seven stocks. YMAG has a total expense ratio of 1.28%, adding 0.29% to the 0.99% the individual stock funds pay. The seven component ETFs have a current average yield of 43%.

The YieldMax™ Universe Fund of Option Income ETFs (YMAX) holds an equal-weight portfolio of all the individual YieldMax ETFs. One nice feature of YMAX is that it will add new YieldMax ETFs as they are released. The 18 currently available ETFs have an average yield of 42%.

YMAG and YMAX have only been trading for a few weeks and have not yet paid their first monthly dividends.

I am most interested in YMAX and look forward to comparing it in our ETF Income Edge service to index-based covered call ETFs.

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Author: Tim PlaehnTim is the lead investment research analyst for income and dividend investing at Investors Alley. He is the editor for The Dividend Hunter, an investment advisory focused on creating a high-yield income stream and it's companion service The Dividend Hunter Insiders, Weekly Income Accelerator, a covered call trading service, and for investors looking for long-term total returns from their income investments using stocks with ever-growing dividend payments, he offers Monthly Dividend Multiplier. He co-edits POWR Income with Jay Soloff. Prior to his work with Investors Alley, Tim was a stock broker, a Certified Financial Planner, and F-16 Fighter pilot and instructor with the United States Air Force. During his time in the service he was stationed at various military locations in the U.S., Europe, and Asia. Tim graduated from the United States Air Force Academy with a degree in mathematics. In his free time he tours the United States parks, campgrounds, and wilderness areas in his travel trailer.
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