On Thursday, YieldMax added to its extensive ETF portfolio with the launch of the YieldMax Ultra Option Income Strategy ETF (NYSE Arca: ULTY).
Following a waiver, the fund operates with a net expense ratio of 1.14%, according to the fund prospectus. It is actively managed and prioritizes current income while offering direct exposure to U.S. securities as well as its option strategies. The fund uses traditional and synthetic covered call strategies that look to exploit increased volatility in its underlying securities. The prospectus noted that higher volatility can translate into higher options premiums.
See more: Chart of the Week: Advisors Considering Covered Call ETFs
Although ULTY’s portfolio primarily includes U.S.-listed equity securities, it can hold other ETFs. The prospectus said the fund may also hold alternate exchange-traded products, such as closed-end funds and commodity pools. ULTY also holds a portfolio of U.S. Treasury securities for purposes of collateral and additional income.
The new fund’s managers select its portfolio of 15-30 equity securities mainly based on implied volatility levels. From there it implements options on those securities in covered call strategies to generate monthly cash distributions.
“Overall, we expect options-based strategies to continue to gain traction in 2024 as education continues. The products take more complicated high-income-generating investment approaches and make them accessible through one ticker,” VettaFi’s Head of Research Todd Rosenbluth noted.
YieldMax currently has a roster of 22 options strategy ETFs representing roughly $2 billion in assets under management.
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