BABO ETF Outperforms on Alibaba’s Fortune

The YieldMax BABA Option Income Strategy ETF (BABO) is the top-performing exchange-traded fund in 2025, according to etf.com data.

The Alibaba Group Holding (BABA) covered call strategy ETF attributes much of its recent success to strong performance, culminating with the Chinese e-commerce company’s positive earnings report released after the market’s close Thursday.  

Alibaba's robust quarterly results and strategic initiatives have bolstered investor confidence, subsequently enhancing BABO's appeal.

On top of its 41% year-to-date gain through Feb. 20, BABO rose another 4% Friday following the earnings report.

ETF Pulse Data: BABO Leads YTD Equity ETF Performance

Data retrieved Feb. 21, 2025, from etf.com Pulse Tool.

Understanding the BABO ETF

Launched Aug. 8, 2024, BABO is an actively managed exchange-traded fund designed to provide current income while offering exposure to Alibaba's share price movements. The fund employs a synthetic covered call strategy, utilizing both standardized exchange-traded and FLEX options, and is collateralized by cash and US Treasuries. This approach aims to generate income through option premiums while participating in the potential upside of Alibaba's stock, albeit with capped gains.

What Is Alibaba?

Alibaba is a leading Chinese multinational technology company specializing in e-commerce, cloud computing, digital media, and artificial intelligence. Named after Ali Baba, the Middle Eastern folk tale character known for using the phrase “Open Sesame” to access a cave full of treasures, the company was founded in 1999 by Jack Ma.  

Alibaba started as an online marketplace connecting Chinese manufacturers with international buyers. Over the years, it expanded into various sectors, launching Taobao (a consumer-to-consumer marketplace), Tmall (a business-to-consumer platform), Alibaba Cloud, and Ant Group, which operates Alipay, a dominant digital payments system in China.  

Alibaba’s ecosystem also includes logistics, entertainment, and enterprise services, making it one of the most influential tech giants in China. Investors have been drawn to Alibaba due to its strong revenue growth, dominance in China’s digital economy, and expansion into global markets. Despite regulatory challenges and geopolitical risks, its scale, innovation, and profitability continue to make it a closely watched stock in global markets.

Ideal Investors for BABO

BABO may be well-suited for investors seeking income generation with exposure to Alibaba's performance. The fund's covered-call strategy appeals to those looking for enhanced yield potential, especially in a low-interest-rate environment.  

However, it's important to note that while this strategy can provide regular income, it may limit participation in significant upside movements of Alibaba's stock.  

Therefore, BABO is ideal for income-focused investors who are comfortable with capped gains and the inherent risks associated with options strategies.

BABO’s Performance Outlook for 2025

BABO’s fortunes align with Alibaba's positive earnings and strategic plans, which have positively influenced investor sentiment. Looking ahead, BABO's performance will mirror Alibaba's stock trajectory. Factors such as Alibaba's expansion into new markets, advancements in technology, and overall economic conditions will play pivotal roles.

While the covered call strategy offers income potential, investors should remain mindful of the capped upside and monitor Alibaba's developments to make informed investment decisions.