To The Moon

It’s raining dividends—until your capital vanishes

If you’ve stumbled across the $YIELDMAX TSLA OPTION INCOME STRATEGY ETF(TSLY)$ and found yourself blinking twice at its 116.56% dividend yield, you’re not alone. I certainly did. Yields like that belong in the land of unicorns and lottery wins. And yet, here we are—TSLY is very real, currently trading at USD$8.12 with over USD$1.15 billion in net assets and a daily volume north of 43 million. So, what’s the catch?

Sky-high yield, shaky floor—something’s not adding up

Well, I’ve gone under the bonnet, and what I found isn’t a Ferrari engine—it’s more like a high-octane gambling machine. Yes, the income is impressive, but the capital erosion risk is eye-watering. For all the excitement this fund creates with its monthly payouts, it’s equally skilled at slowly (or sometimes quickly) eating away at your principal. And in this game, it’s not what you earn—it’s what you keep.

The yield is real—but so is the drawdown

TSLY’s income engine runs on a variant of the classic covered call strategy. In essence, it sells near-the-money call options on Tesla stock (without holding the stock itself) and collects the premiums as income. The catch? When Tesla rises sharply, the ETF must pay out the difference between the stock price and the strike price—effectively selling upside it never owned. That’s why strong Tesla rallies inflict pain rather than reward. Meanwhile, the fund also writes or buys put options to manage downside exposure, but this adds more complexity than meaningful protection.

The result is a fund that thrives when Tesla does absolutely nothing. If Tesla meanders within a narrow range, TSLY happily clips option premiums each month and passes the income to shareholders. But that’s hardly the stock’s reputation. Tesla is one of the most volatile names in the market—anything but predictable.

That volatility has been brutal for TSLY investors. Since the ETF’s launch in late 2022, Tesla has gained around 65%, yet TSLY’s share price has fallen by nearly 60%. Even after collecting those generous monthly distributions, the total return doesn’t come close. And for early investors who bought near the highs, the drawdown has been even steeper. That’s not income investing—that’s capital immolation.

When Tesla climbs, TSLY sinks — the divergence in plain sight.

Why this yield-mad strategy found a following

Still, I understand the appeal. In a market where dividend growth has slowed and bonds are losing their shine, high-octane yield products like TSLY have filled a vacuum. They offer synthetic income without requiring a shift into traditional high-yield debt or stodgy utilities. It’s income for the impatient.

TSLY isn’t alone either. Other synthetic-income ETFs like $JPMorgan Equity Premium Income ETF(JEPI)$ and $Global X Nasdaq 100 Covered Call ETF(QYLD)$ have also gained traction, albeit with less aggressive positioning. What sets TSLY apart is the sheer scale of its yield—over 100% annually—and its razor-sharp focus on a single, notoriously volatile stock. It’s an all-in bet on income over growth, with little regard for the capital foundation beneath it.

And here’s a detail many investors miss: the ETF’s net asset value (NAV) is currently USD$8.31, slightly above its market price of USD$8.12. That discount reflects the market’s scepticism—or perhaps its pricing in of the next $Tesla Motors(TSLA)$ earnings surprise. Either way, it suggests income chasers may still be buying without fully appreciating the risk they’re absorbing.

When Tesla moves, you lose—either way

Here’s the real irony. TSLY suffers when Tesla rallies because of the cost of covering those short calls. It also suffers when Tesla declines, because put exposure drags the NAV lower. It’s a classic 'short gamma' position—where price stability is rewarded, and volatility punished.

That leaves investors hoping Tesla remains inert for long periods. Unfortunately, that’s not how this stock behaves. Over the past year alone, Tesla has swung nearly 80% from trough to peak—rising from under USD$180 to above USD$320 before settling back. That’s a rollercoaster, not a yield farm.

Add to that a 1.04% expense ratio and you’re paying a premium to play in a market where losses can come fast and furious. $YIELDMAX TSLA OPTION INCOME STRATEGY ETF(TSLY)$ doesn’t yet have a full three-year track record, but so far, the results have been underwhelming. The broader derivative income ETF category has averaged over 7% annually. TSLY? Despite the jaw-dropping headline yield, it’s trailing the pack badly in total return.

Tactical weapon, not a long-term friend

As tempting as it is to dream about a monthly dividend cheque the size of your rent, TSLY is not built for long-term wealth preservation. It’s an income machine strapped to a rocket—designed for short bursts, not quiet compounding.

Still, I don’t walk away entirely pessimistic. TSLY could be a clever tactical tool in the right hands, especially if you’re confident Tesla will trade sideways for a quarter or two. For seasoned investors who understand options mechanics and are willing to monitor the position closely, there’s value to be extracted.

But for most portfolios, this isn’t a yield strategy—it’s a risk strategy with income as a by-product. Approach it with your eyes wide open, your time horizon short, and your expectations in check. The monster yield is real—but so are the monsters hiding underneath it.

Chessboard with Tesla-inspired pieces tumbling into digital void

@TigerStars @Daily_Discussion @Tiger_comments @Tiger_SG @Tiger_Earnings @TigerClub@ @TigerWire