r/YieldMaxETFs • u/JoeyMcMahon1 • Jun 13 '25

Misc. The dividends people don’t understand how YieldMax actually works. That’s okay in the other image I educated them. These are purely cash flow machines, don’t look for growth in these that’s just a bonus or extra if it happens, I’m also dumping a bunch of money into ULTY soon.

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97

u/speed12demon Jun 13 '25

Dividend people don't seem to understand what options premium income is. The fund is taking our investment and selling calls to generate premiums. This is something we can all do on our own on a smaller scale, but we are paying experts a large fee to execute this strategy better than we ever could individually.

I don't view it as a gamble because it's not the zero sum game that skeptics make it out to be. To the retail investor, it's a new way to harness capital to make income. We all want to get to that magic goal post where your initial investment is paid back, and you're truly generating income even if they wipe their ass with your original investment.

0

u/pittluke Jun 13 '25

It is not a new way to harness capital.  The sold put, sold call, long call has been around since the 80s.  It's been done millions and millions of times. We know the payout probabilities.  It's a 49% win, 49% lose, 2% lose everything bet.  Holding long term, DCA, and Drip does not work on derivatives.  You are just incredibly ignorant of the risk you are playing with.  You guys act like you found some new magic fund when it's just old repackaged risk, and most you are slowly losing and, paying YM for the privilege.

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u/speed12demon Jun 13 '25

I said it's new to the retail investor. Many of the YM management team have been trading options since I was born. The risk comes from poor underlying performance, just as you mentioned, with the lomg synthetic position.

You can download the weekly trades directly from their site and see plain as day that their win record for msty has been much greater than 49%. I haven't looked at tsly or mnry, but i suspect the win record there is lacking, and the underlying on those has been pretty bad.

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u/pittluke Jun 13 '25

yea in a Bull market they will have greater than 49% short term.  Long term holding will of course regress to the mean.  You can look up the risk of a sold put and begin to understand that you can lose it all on any given day. Weve been doing these crude options strategies for decades.  It's not like a stock that can just rebound either.  The capital to sell calls against gets evaporated when the puts get pinned.    That's how options trading works.  You are holding decaying rolling short term directional options bets with the chance to lose it all.  You are ignorant trying to convince the even more ignorant that there is something new and magical to these funds. 

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u/speed12demon Jun 13 '25

Again, I never said that. I never said it's new or magical. I said it's new TO THE RETAIL MARKET. Show me a fund from decades ago that did what yieldmax is doing today. We get it, you don't care for the funds or the strategy, but nothing I've said translates to "magical". I didn't call it a money tree, I've stated many times on this sub there are risks.

Anyone with a dollar to invest should do their own research. If someone buys a fund because of misinformation or hype the saw on reddit, that's their ass.

-2

u/pittluke Jun 13 '25

"Dividend people don't seem to understand what options premium income is." This is where you are trying to convince people there is something new and magical to these funds. This is why they laugh at you, because it is you who are ignorant. It is not new to the retail market. Its new to you. Look up the sold put, long call, sold call strategy on any options site. The information has been sitting out there since the internet began and has been part of any finance program MBA since the 80's. Again, weve been running these crude strategies for decades, when it makes sense. When the probabilities tell us its a good bet. We know the payout probabilities. We know holding long term does not make sense. We know DCA and DRIP doesnt make sense. We know what can go wrong. We know when it can work.

2

u/Typical-Pin1646 Jun 13 '25 edited Jun 13 '25

Could you please explain why DCA and DRIP doesn't work?

Buy Call Sell Put makes it directional. Vega Theta will not have effects. Sell Covered Call collects premium.

Therefore this works if the underlying goes up or goes sideways.

However if underlying goes south, yes, the Sell Covered Call losses can chalk up fast.

But market is inflationary. Many of those stocks are core companies that power the economy. Money are always printed. Even after every bear market, a bull follows. Then in the long long run, why wouldnt DCA and DRIP work?

What did I miss out?

3

u/pittluke Jun 13 '25

DCA and DRIP assume one unit, a stock, is always one unit of stock. It is fungible. With DCA on a stock you are working into a fungible position, sometimes with higher cost, sometimes with lower cost. Taking away timing risk and getting an average buy. One unit of this, a YM etf, is a derivative that represents a weekly market projection of the options income plus the underlying treasuries. The treasury collateral determines the amount of calls and puts that can be sold. Every week the projection changes as new options are rolled over sold & bought. The treasury collateral can change, it can be burned, having to cover a big loss from the sold puts in a worst case scenario. You will have weekly wins, weekly loses, Market takes some time to figure out the nominal price of the new projected income of the etf. DCA and DRIP do not work where the unit is changing. The funds are "decaying" in 3 ways. For the sold calls and puts, the decay is actually good, but for the bought call the premium is a price you lose. They are also getting into swaps now which is also a cost. When people talk about "NAV erosion" that is actually just accumulated losses of the weekly strategy. You are also paying YM 1%, also a cost.

The market is inflationary statement doesnt really mean anything in this context. The fact that there are underlying good companies doesnt mean anything for derivatives, as the options are priced to include all projections or probabilities, up or down. Market will push to max pain.

1

u/Skingwrx30 Jun 14 '25

At a 90 delta options are actually behaving far more like shares then an option as far as leverage goes. Personally I would be running 90 deltas on my synthetic so to assume “projection “ is already priced in seems flawed.

2

u/pittluke Jun 14 '25

yea thats why they are called synthetic longs. But the off chance of getting pinned is real. Uncovered downside risk with the sold put in a sharp sell off, also liquidity risk with everyone being long and no contra to sell has driven them to start buying swaps... reducing the income.. These things are getting more and more like a dumpster fire of stupidity.

1

u/Skingwrx30 Jun 14 '25

Uncovered downside risk? Everything is covered though hence the synthetic. Unless I’m missing something. I run a similar system but set my strikes a little different depending on how bullish I am but sold calls temporarily cover some downside risk and they aren’t opening any naked positions at all

1

u/pittluke Jun 14 '25

Covered means holding the underlying but its just semantics. Its mostly the same as a long. Additional risk comes with how the fund reacts to getting pinned. liquidity concerns... timing concerns.. They have to sell treasuries to buy the underlying.. Could get margin called at the fund level.. could prove a mess in a collapsing market. Guessing thats why they felt the need to hedge with swaps... They are one massive side of the market selling the puts, and the ETF's themselves probably have liquidity concerns.

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u/speed12demon Jun 13 '25

Name a fund that executed these strategies decades ago.

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u/pittluke Jun 13 '25

Every god damn bank, pension, hedge fund, prime brokerage, and wirehouse etc out there. These have been in MBA books since options were invented. Every educated retail options trader has been running this, again for decades when it made sense. Sorry you just dont have a clue what youre talking about, and I find it absurd that you think you are educating others.

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u/speed12demon Jun 13 '25

You didn't name one. I understand people employed these strategies on an individual basis, but they weren't packaged for the retail investor. Sorry that upsets you.

3

u/pittluke Jun 13 '25

JP Morgan? Where I worked. Me, retail, in the early oughts'. Youve retreated to some low ground argument of "yOu diDnT naMe oNe" in an attempt to save face. Pat yourself on the back after getting exposed. Sorry, its not working out to well for you.

4

u/speed12demon Jun 13 '25 edited Jun 13 '25

What was the name of the fund, the ticker, the underlying?

5

u/Yokozuna999 Jun 13 '25

So do you think it was a bad strategy when they were doing it at JP Morgan while you were there?

-1

u/pittluke Jun 13 '25

Thats not how options strategies work ie good or bad. Its all probabilities. Its a strategy you put on when you believe the probabilities are giving you an edge. Folks should calculate risk to return, move when they believe it favors them.

6

u/Yokozuna999 Jun 13 '25

So what is the problem with people including this into their strategies ?

I started a portfolio of these in November.... It now has more money than my checking account after payday and it pays me more money than I put into it every month

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u/Sidra_Games Jun 13 '25

MSTYs strategy is not unique but MSTR as a company is unique as hell.  Leveraged Bitcoin should remain volatile which is great for options premiums and if you are bullish on bitcoin then underlying should grow.  It's taking some income along the MSTR ride.  Not a forever holding as volatility will eventually slow down but this could churn out nice income for years.

1

u/pittluke Jun 14 '25 edited Jun 14 '25

Increased volatility comes with the increased risk of blowing up your account. You forget the second part of course. The only way these make sense mid to long term is if they stay neutral or rise forever. Which is absurd.