The YieldMax MSTR Option Income Strategy ETF (NYSEARCA:MSTY) has been a falling knife of sorts so far this year, now with a year-to-date loss of 44%. Undoubtedly, the stock chart doesn’t look all too great, but with one of the largest distribution rates out there, currently sitting just over 92%, some brave dip-buyers who buy into the strategy may wish to keep on buying up the shares as prices continue to sink lower.
Undoubtedly, with incredibly high levels of volatility and a profound amount of uncertainty, investors should put in the homework before they seek to trade the high-yielding heavyweight while shares continue to implode, perhaps toward the double-digits.
Is MSTY a Buy on the Dip? Or Is It Best to Hold off on That Massive Yield?
If the distributions paid out exceed the pace of capital depreciation, investors in shares of MSTY could walk away as winners. Undoubtedly, the MSTY, or just about any ETF offered by YieldMax, isn’t like your average equity ETF. In fact, it’s an active ETF that doesn’t own shares of Strategy (NASDAQ:MSTR | MSTR Price Prediction) directly, but uses synthetic covered calls to fund the towering distribution. Indeed, before you ask if you should bite on MSTY and its nearly 100% yield, investors should first ask themselves if they’re upbeat about the future of the firm that stands behind the ETF.
Strategy, formerly known as MicroStrategy, is an analytics software developer that’s perhaps best known by investors as being the largest corporate holder of Bitcoin. Indeed, the firm welcomed the emerging cryptocurrency with open arms well ahead of an explosive surge, minting Strategy massive gains.
How Bullish Are you on Strategy’s Strategy?
Though maintaining a substantial Bitcoin reserve accompanies a ton of risk, especially for capital that would have otherwise been held in cash that just sits there on the balance sheet, acting as a sitting duck as inflation weighs on its purchasing power, Strategy’s bold move paid off big-time, as shares have rocketed more than 830% in the past two years or 2,200% in the last five years.
Despite Bitcoin’s hot run, Strategy is still buying up the Bitcoins on strength. And though it’s important to remember that there’s a software company here, the stock has been viewed as a proxy for Bitcoin for some time. Given the firm’s profound success in Bitcoin investing, many wonder if the firm is a pioneer of sorts, as other firms potentially look to consider holding some Bitcoin on the balance sheet.
In any case, the strong correlation with the price of Bitcoin and high beta (3.83 beta) to the market makes MSTR a very intriguing security for the crypto bulls to trade. For those who like the software company as well as the confidence in Bitcoin, MSTR stock may very well be a better bet than Bitcoin itself.
Now, back to MSTY, which is tied to MSTR, which is tied to Bitcoin. I believe the ETF fulfills a passive income need that’s hard to come by for those bullish on Bitcoin. Undoubtedly, you’re not going to get dividends from Bitcoin or MSTR, but with MSTY, you’re getting a big dividend, but you’ll have to decide whether it’s worth it to deal with plunging share prices.
It’s All About the Distributions
If we’re talking total returns, though, the colossal distributions have allowed for positive total returns despite the tanking share price. Since its early-2024 debut, shares have posted total returns of over 230%. That’s impressive. And that return has come in the form of dividends that have rained in.
So, where are all the dip-buyers?
It’s tough to say, but holders have been satiated by the massive distributions thus far. In short, if you’re looking for an income-rich way to play strength in Strategy (which typically entails strength in Bitcoin) via options, I think MSTY is a great bet. However, investors should keep tabs on performance, given it’s easy to lose sight of how much one is up or down on a total return basis.
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