ULTY’s Sky-High Yield Is Turning Heads — Here’s the Catch

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Among the legions of YieldMax fund fans, one of the most talked-about exchange traded funds (ETFs) is the YieldMax Ultra Option Income Strategy ETF (NYSEARCA:ULTY). When you find out how high the ULTY ETF’s expected annual yield is, you might get an urge to buy a boatload of shares today.

Yet, it’s wise to wait and get the full story about the YieldMax Ultra Option Income Strategy ETF if you’re thinking about making a big investment. Don’t just assume that the fund’s cash payouts are free money without any risks involved. Stay tuned and you’ll find out why some traders are loyal to the ULTY ETF and why others choose to stay away.

Leveraging Volatility for Head-Turning Yield

Taking a peek inside of the YieldMax Ultra Option Income Strategy ETF, we’ll discover a holdings list that includes some fast-moving stocks. A handful of examples of ULTY’s holdings include the stock shares and/or options for Rocket Lab USA (NASDAQ:RKLB), Reddit (NYSE:RDDT), Applovin (NASDAQ:APP), IonQ (NYSE:IONQ), Microstrategy (NASDAQ:MSTR), Oklo (NYSE:OKLO), and Affirm Holdings (NASDAQ:AFRM).

Those stocks and some others on the holdings list of the YieldMax Ultra Option Income Strategy ETF can often be volatile. That’s not necessarily a problem, though, since the ULTY ETF leverages that volatility by selling covered call options to generate substantial income.

The options trading strategies of the YieldMax Ultra Option Income Strategy ETF help to explain the fund’s eyebrow-raising yield. Believe it or not, the ULTY ETF advertised a 90.35% annualized distribution rate as of August 27, 2025.

Mind you, that’s an anticipated annual yield and YieldMax can change that yield at any time. Nevertheless, the prospect of nearly doubling one’s money with ULTY is certainly alluring. Additionally, this fund currently provides cash payments on a weekly basis.

Along with the risk of a possible yield reduction in the future, there are also expenses to deal with. In particular, the YieldMax Ultra Option Income Strategy ETF automatically deducts 1.3% (after a fee waiver) from the share price on an annualized basis.

Here’s the Catch With ULTY

We’ve already touched upon two issues that might dissuade you from buying the YieldMax Ultra Option Income Strategy ETF. These issues are the variability of the yield and the 1.3% in annual operating expenses (which is high among ETFs).

Those risks might not be deal breakers for ambitious passive income seekers. However, the YieldMax Ultra Option Income Strategy ETF’s hefty yield creates another issue and it’s a factor that must not be overlooked.

So, ULTY offers a 90% yield but what’s the catch? It’s the serious threat of share-price erosion. Consider how the YieldMax Ultra Option Income Strategy ETF has performed over the past year as of August 27, 2025.

Many of the stocks included in the YieldMax Ultra Option Income Strategy ETF have performed well over the past 12 months. During that same time frame, however, the ULTY ETF’s share price declined by 49.3%.

The main culprit, it seems, is the options-trading strategies that help enable the massive yield and weekly payouts. YieldMax acknowledges that, when selling covered call options, the ULTY fund “might limit its potential for capital appreciation in exchange for premium income.”

Thus, the prices of the stocks in ULTY’s holdings list (Rocket Lab USA, Reddit, Applovin, and so on) might zoom higher, but the share price of the YieldMax Ultra Option Income Strategy ETF may only rise slightly. It’s also possible that the fund’s share price could fall in some scenarios.

When Sky High Yield Doesn’t Seal the Deal

Maybe you’re willing to accept all of the issues associated with the YieldMax Ultra Option Income Strategy ETF, including the risk of share-price erosion. If so, then it’s still a good idea to limit your position size in ULTY to prevent the possibility of a portfolio meltdown.

In contrast, for some folks, the YieldMax Ultra Option Income Strategy ETF’s sky-high yield isn’t enough to justify taking a share position. After all, even after collecting big cash distributions week after week, it might still be disappointing to watch ULTY’s share price erode over the long term.

So yes, the YieldMax Ultra Option Income Strategy ETF’s massive yield does come with a catch and this fund isn’t right for everyone. That said, if you’re still interested in owning the ULTY ETF, just be sure to limit your position size and be prepared for all outcomes, including ones you might not expect.

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