YieldMax NVDA Option Income Strategy ETF

NVDY

Market cap $1.59B

Successful passive income investing doesn't have to be overly expensive or labor-intensive.

Retiring on dividends requires balancing attractive yields with safety and growth to ensure sustainable, inflation-beating income over time. Many investors are shooting themselves in the foot with these 3 dividend traps. We detail how to avoid these dividend traps and instead build a sustainable dividend portfolio for retirement.

Yieldmax NVDA Option Income Strategy ETF (NVDY) has delivered a strong 42.67% return, outperforming the S&P 500 but lagging NVDA itself. NVDY's covered call strategy provides perceived safety and consistent distributions, though share price declined 28% year-to-date. Given Nvidia's strong near-term prospects and dominant AI position, I upgrade NVDY from sell to hold, despite reservations about the product.

NVDA has done very well since I raised my sell rating to a hold back in April. This has meant that NVDY has done very well also. I am worried that investors will confuse this with NVDY's strategy outperforming, when it is still lacking NVDA. Investors looking for income are likely better off avoiding single-stock covered call funds like NVDY. They are fighting gravity by betting against the upside against a $5T company.

In the current investment and financial world, there isn't going to be much of an argument when someone says that dividends are having a moment.

Comparing YieldMax MARA Option Income Strategy ETF (MARO) and YieldMax NVDA Option Income Strategy ETF (NVDY) highlights how underlying volatility impacts option income strategies. MARO's high volatility results in better upside capture but fails to cushion drawdowns, making it reliant on MARA's capital appreciation rather than option income. NVDY performs better in neutral to mildly bullish conditions, offering a higher yield on cost and is rated Buy for tactical use in consolidating or overheated Nvidia scenarios.

YieldMax's extensive suite of exchange traded funds (ETFs) have a large and dedicated following, and there are a number of reasons for this.

YieldMax NVDA Option Income Strategy ETF offers a remarkable 79.11% distribution yield, attracting income-focused investors seeking high monthly payouts. NVDY uses synthetic positions and covered call strategies on Nvidia stock, generating substantial income but not replicating NVDA's capital appreciation. NVDY's Distributions generated over 20% of the initial investment in the first 4 months, and it's on track to pay for the entire investment within the next 16 months.

Income-focused investors have plenty of options at their disposal when it comes to exchange-traded funds (ETFs). One type of ETF that is gaining a lot of traction today is option income ETFs.

Pessimistic market sentiment often creates generational buying opportunities. Legendary investors like Warren Buffett have made fortunes by being greedy when others are fearful. Unfortunately, while the data points provide a ground for being fearful, the market is still greedy. We could make a case for experiencing 'the everything bubble'.