Note One) Amateur investor here who has committed every investing mistake (except one) humanly possible. Nothing you see here represents any sort of recommendation; albeit, it might seem like one. But…it’s not.
In my limited opinion - savvy, intelligent investors can add a nice pile of cash to their bottom line using options. Proof as they say - is in the results - and - when it comes to results, particularly in the stock market, its best to never, ever confuse efforts with results.
When it comes to Options I am limited to two important considerations:
- I don’t know jack about Options.
…and… - I have no desire to learn Options trading.
Both of these issues to my great detriment! Sigh.
So, in such a condition, what might one do to take advantage of the great and wonderful ancillary cash produced by Options? Well - that’s rather simple in theory and perhaps a little iffy in actual practice. For example I could simply lay out a little more cash and subscribe to The Fool Options service - that is, if in fact the Fool has an Options subscription service. Moreover, even I had the slightest desire to subscribe to such a service I would still have to go through all the various machinations attached and critically important to actually employing Option strategies. So…what to do?
Note Two) In spite of their valuable contributions to my overall investing health - it’s probably for the best if my conservative investing friends stop reading this post right here. Going further would be similar to chancing the exploration of the dark hidden and unexplored tributaries of the Amazon rain basin. Could be giant anacondas lying in wait…pygmies with poisonous blowgun thingys…cannibals with large metal boiling pots… and pygmy cannibals, etc…stc.. For your own good - stop now while you can.
Now that that is behind us - whosoever has managed to somehow stumble across the woebegone outpost of (marginal) investing chitty chatty…may proceed while employing healthy skepticism and the utmost of caution. Remain alert!
The potential solutions/answers to my Options Trading dilemma do exist However, it should also be noted that just about everyone I talk to - or the authors that post on these ETFs - say they are incredibly dangerous and inherently risky; which I take to mean that you can lose your money. So there’s that I suppose. But - there are safety nets for that sort of stuff - of a sort.
The ETFs I speak about are the YieldMax funds that operate solely on Option strategies. They were started by one company and are managed by another - which, if one is not careful, can sound a little shady - or even a lot of shady if you want to go that far.
Here is what YieldMax says about YieldMax:
YieldMax™ ETFs was founded by ETF industry veterans with decades of experience in income-focused investments, options strategies, portfolio management, fund risk management, and fund operations. Our mission is to create innovative and unique ETFs that solve problems for investors of all types.
Here are a few of their ETFs with current posted Yields:
TSLY… 106.7%
OARK…50.86
APLY…62.62
NVDY…51.83
AMZY…65.27
FBY…41.60
and on and on.
With YieldMax ETFs you do not own anything other than a share of the Options Trading profit - if there is any. In way of explanation lets take one for example: MSTY
Here is how YieldMax describes MSTY:
YieldMax™ MSTR
Option Income
Strategy ETF
"The Fund does not invest directly in MSTR.
Investing in the fund involves a high degree of risk.
Single Issuer Risk: Issuer-specific attributes may cause an investment in the Fund to be more volatile than a traditional pooled investment which diversifies risk or the market generally. The value of the Fund, which focuses on an individual security MSTR, may be more volatile than a traditional pooled investment or the market as a whole and may perform differently from the value of a traditional pooled investment or the market as a whole.
The Fund’s strategy will cap its potential gains if MSTR shares increase in value. The Fund’s strategy is subject to all potential losses if MSTR shares decrease in value, which may not be offset by income received by the Fund. The Fund may not be suitable for all investors.
Shareholders of the Fund are not entitled to any dividends paid by MSTR."
So - How they doing?
Going back 1Yr assuming a 1000 share position:
Price May 20 2024: $35.22
beginning Value: $35,220.
Current Price (Intraday): 23.60
Current Value: $23,600
Distributions last 12 months :
$30.23 per share X 1000 shares = $30,230
Annual Results for 1 Yr:
$23,600 Capital Value Remaining
$30,230 In Distributions
Current Value of Investment: $53,830
Couple of Points Here:
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Just from the eyeball analysis MSTY looks like a really good investment to me over the last 12 months with the actual return predicated on what one might have done with the distributions. Did the investor go out and purchase a Mini Cooper with whatever depreciation is occurring - or - did the investor roll the distributions into other income producing investments. Its complicated.
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But that was then - and this is now. In other words: the whole past performance does not equal…blah blah blah, thingy. The average monthly distributions appear to be falling: The first 5 months of distributions averaged $1.87 per share for a total of $9.38 to date. At the average implied the total distributions for 2025 would come to about $22.52 per share which equates to $22,520 for the year.
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The unknown is will the Capital investment continue to erode and by how much? My bet is that it will.
Here are a couple of Scouting Reports:
So is an investment in MSTY worth a shot?
Well - in a concentrated portfolio - absolutely not. However, in our Income flywheel Port the risk is marginalized to some degree by limiting positions to 2-3%.
If I was an intelligent and Option savvy investor I would not touch any of the YieldMax ETFs. But I’m not. So it’s iffy for me and I probably will go through a number of the YieldMax funds to see if they all have the same pattern or diminishing Distributions along with declining share prices.
All the Best,
Big Dumb Hick Investing
