Why I’m Thrilled About ULTY’s Limited Upside – Enjoying 80% Yield Compounded Weekly

What Is ULTY, and Why All the Fuss?

The YieldMax Ultra Option Income Strategy ETF (NYSEARCA:ULTY), launched on February 28, 2024, is an actively managed exchange-traded fund (ETF) designed to deliver substantial monthly income through a portfolio of covered call strategies. 

Unlike traditional ETFs, ULTY employs complex options strategies on 15 to 30 volatile U.S.-listed securities, generating income from option premiums, dividends, and U.S. Treasuries. Its headline-grabbing distribution rate — currently an astonishing 87.4% — makes it one of the highest-yielding ETFs available, attracting income-focused investors.

However, this sky-high yield comes with a catch: the fund’s exposure to high-beta stocks and reliance on return-of-capital distributions can erode its net asset value (NAV) over time. While ULTY pays weekly distributions, appealing to those seeking frequent payouts, its strategy caps upside potential and exposes investors to significant downside risks, making it a speculative play in the high-yield ETF space.

A High-Yield Gamble

The YieldMax Ultra Option Income Strategy ETF has captured the attention of risk-tolerant investors with its jaw-dropping yield, but a closer look reveals a complex and volatile investment that demands caution. 

Like its YieldMax sibling, YieldMax Universe Fund of Option Income ETFs (NYSEARCA:YMAX), ULTY uses covered call strategies to generate income, but it stands out by focusing on a concentrated portfolio of high-volatility securities. This approach fuels its lofty distribution rate, but it also introduces substantial risks that could undermine long-term returns.

ULTY’s performance is a mixed bag. Over the past year, it delivered a total return of 27.86%, including dividends, outpacing the S&P 500 in some periods. However, its share price has plummeted, with a year-to-date decline of 33%, a 51% drop over the past 12 months, and a staggering 69% loss since its inception in February 2024. 

This sharp NAV erosion highlights a critical flaw: while the fund’s distributions are enticing, they often include return-of-capital, which reduces the fund’s value and can lead to significant losses for investors holding long-term. 

For example, weekly payouts have dwindled from over $1 in 2024 to around $0.10 per share in mid-2025, reflecting the fund’s sensitivity to market conditions and declining share price.

Betting on Volatility

The fund’s strategy thrives on volatility, selecting underlying securities based on their implied volatility levels. This allows ULTY to collect hefty option premiums, but it also exposes investors to the full downside of these high-beta stocks. 

Unlike YMAX, which diversifies across a basket of YieldMax ETFs, ULTY’s concentrated portfolio amplifies risk. For example, in April, during a 7.8% S&P 500 pullback, ULTY fell 7.7%, showing some resilience compared to other YieldMax funds like YieldMax MSTR Option Income Strategy ETF (NYSEARCA:MSTY) (down 12.2%). 

Yet, this relative stability is overshadowed by its long-term price decline, suggesting that the high yield may be more of a mirage than a sustainable income stream.

Costs: A Drag on Returns

Expense ratios further complicate the picture. ULTY’s gross expense ratio is 1.40%, with a net ratio of 1.30% after a 0.10% fee waiver through February 2026. Compared to YMAX’s 1.28% gross expense ratio, ULTY’s higher costs eat into returns, especially in a declining NAV environment. 

Additionally, the fund’s reliance on complex derivatives and active management requires skilled execution, and any missteps could exacerbate losses.

A Speculative Play

For investors, ULTY is a high-stakes bet. Its weekly payouts and tax-deferred return-of-capital distributions appeal to those seeking immediate income, but the fund’s structure makes it better suited for short-term, speculative plays rather than long-term wealth building. 

A Reddit user reportedly turned $170,000 into $221,000 using ULTY, illustrating its potential for savvy traders. However, critics label it a “gambler’s ETF,” warning of its unsustainable yield and NAV decay. 

Compared to alternatives like the NEOS NASDAQ-100 High Income ETF (NASDAQ:QQQI), which offers a 14.65% yield with broader diversification and a rising share price, ULTY’s risk-reward profile appears less favorable for conservative investors.

Proceed With Caution

In conclusion, ULTY’s ultra-high yield is alluring, but its significant risks — NAV erosion, high fees, and volatility — make it a speculative choice. Investors should approach it with a small position, if at all, and monitor distributions and share price closely. 

For those seeking high-yield ETFs, diversifying with funds like QQQI or YMAX may offer a better balance of income and stability.

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