YieldMax’s “Income” Illusion

If you bought a YieldMax ETF this year, you probably would’ve been better off just owning the stock.

I went through every YieldMax ETF trading at the start of the year and tracked performance through November 7. It didn’t matter whether the underlying stock or ETF soared, stumbled, or moved sideways; the YieldMax version almost always lagged.

Not in every single case, but close.  

How I Ran the Numbers

For this analysis, I focused on the YieldMax ETFs that were live on Jan. 1. I excluded the inverse products, the funds that hold multiple YieldMax ETFs such as the YieldMax Universe Fund of Option Income ETFs (YMAX) and the YieldMax Dorsey Wright Featured 5 Income ETF (FEAT), and those without clear benchmarks, like the YieldMax Ultra Option Income Strategy ETF (ULTY).

That left 28 funds covering everything from gold miners to big tech to Bitcoin. Most were single-stock ETFs such as the YieldMax AMD Option Income Strategy ETF (AMDY) and the YieldMax BABA Option Income Strategy ETF (BABO). 

A few targeted other ETFs, like the YieldMax Gold Miners Option Income Strategy ETF (GDXY) and the YieldMax Innovation Option Income Strategy ETF (OARK), which write options on the VanEck Gold Miners ETF (GDX) and the ARK Innovation ETF (ARKK). 

I also included two funds where the underlying wasn’t specified but a reasonable benchmark was clear. I benchmarked the YieldMax Target 12 Semiconductor Option Inc ETF (SOXY) to the iShares Semiconductor ETF (SOXX), and the YieldMax Target 12 Big 50 Option Income ETF (BIGY) to the Invesco S&P 500 Top 50 ETF (XLG). 

To define performance gaps, I treated anything within plus or minus one percent as roughly equal. Anything beyond that counted as underperformance or outperformance. 

Losing in Every Market

The results weren’t close. Of the 28 ETFs, 19—or about two-thirds—underperformed. Six were roughly even. Only three outperformed, and even those by slim margins.

Whether the underlying stock was surging, drifting sideways, or falling, the YieldMax version usually lagged.

The weakest results came when the underlying rallied hard, which isn’t surprising. Selling call options into a strong bull run caps much of the upside. GDXY, which writes calls on the VanEck Gold Miners ETF (GDX), is up 68% this year, while GDX itself has gained 114%, a 46-point shortfall. AMDY, which tracks AMD, rose 66% versus a 93% gain for the stock.

That kind of double-digit gap appears again and again. The YieldMax JPM Option Income Strategy ETF (JPMO) is up 21% this year compared to a 34% rise in JPMorgan. The YieldMax SMCI Option Income Strategy ETF (SMCY), which tracks Super Micro Computer, has gained only 7.6% versus a 30.5% rally in the stock.

Super Micro’s violent swings made life especially difficult for the YieldMax fund. In a choppy market, you can sell a call and miss the upside, then reset at a higher strike and take fresh losses when prices swing back down. That’s likely what happened here. 

The same dynamic hurt the YieldMax COIN Option Income ETF (CONY). It’s down 3.2% this year, while Coinbase stock is up 24.5%. A 50% plunge in the stock early in the year followed by several 25% swings left the ETF hopelessly behind.

Even avoiding volatile names doesn’t solve the problem. The YieldMax XOM Option Income ETF (XOMO), tied to the relatively steady Exxon Mobil, is up just 3.8% this year versus a 12% gain for the stock. 

Exxon hasn’t been especially volatile. Apart from a 16% market-driven correction in April and a few smaller pullbacks, the stock has been fairly steady, but even that mild movement was enough to drag the option strategy below the underlying. 

When Stocks Fall

Things look slightly better when the underlying declines, but not by much. Of the seven YieldMax ETFs whose benchmarks were negative year-to-date, three matched their underlyings, three trailed, and one managed a small outperformance.

That lone “winner” was the YieldMax AI Option Income Strategy ETF (AIYY), down 53.4% this year versus a 54.9% loss for C3.ai stock. 

The best performers overall were the YieldMax AMZN Option Income Strategy ETF (AMZY) and the YieldMax TSLA Option Income Strategy ETF (TSLY). AMZY is up 15.2% and TSLY 10.1%, each about four percentage points ahead of their underlyings.  

The “Income” Argument

Defenders of these products will say underperformance is beside the point. These are income strategies, not meant to beat the underlying.

But that logic doesn’t really hold up. You’re still taking on the same single-stock risk as Tesla or AMD. The difference is that YieldMax sells away a huge chunk of your upside and hands it back to you in monthly “income” payments.

That isn’t income in any meaningful sense. 

And for anyone who still clings to the idea that these funds shine in “rangebound” markets, the data says otherwise. Even among stocks that traded mostly sideways, the YieldMax versions often trailed.

Longer-Term

Even the few funds that matched or slightly beat their underlyings this year look worse when you extend the timeline.

Take the YieldMax MSTR Option Income Strategy ETF (MSTY), YieldMax’s largest ETF with $2.7 billion in assets. It’s down 16.2% this year, roughly in line with its underlying, but since February 2024, it’s up 158% compared to 260% for the stock—an underperformance of more than 100 percentage points.

The YieldMax TSLA Option Income Strategy ETF (TSLY) tells the same story. It’s up 56% since inception in late 2022, versus a 153% gain for Tesla stock. Even the Direxion Daily TSLA Bull 2X Shares (TSLL), with all the drag from financing costs and volatility decay, is outperforming TSLY, with a gain of 99% over the same period.

Across the YieldMax lineup, the results tell a consistent story. These funds may offer eye-catching yields, but the cost of that “income” is clear in the total returns.

YieldMax, meanwhile, has built a money machine out of these funds. The issuer now offers 55 ETFs with about $14 billion in assets and a median expense ratio of just over 1%. That translates to roughly $160 million in annual revenue for the firm.

In that sense, YieldMax’s income story is real. But it’s the issuer, not the investors, collecting it.