On Tuesday, YieldMax launched its newest option strategy fund, the YieldMax SNOW Option Income Strategy ETF (SNOY ).
SNOY is actively managed and comes with a net expense ratio of 0.99%. The fund aims to provide investors with current income through exposure to the share price of Snowflake Inc. (SNOW).
To meet its investment goals, SNOY uses a synthetic covered call strategy. These call options can provide current income through option premiums, along with indirect share price return exposure to SNOW. By doing so, the fund aims to generate income from both options investing and in instances when the value of SNOW increases.
Options in play for SNOY include both buying and selling FLEX and standardized call and put option contracts. In doing so, the fund aims to attain synthetic long exposure. Call and put options for the fund will generally have one- to six-month terms and strike prices roughly equal to the current price of SNOW, per the fund prospectus.
The fund prospectus noted that SNOY does not directly invest in SNOW. Instead, the fund provides indirect exposure through the use of options contracts. This indirect exposure can help investors engage in some of the potential gains SNOW may witness, along with the potential for monthly income. However, the indirect exposure means SNOY will likely perform differently than SNOW’s stock price.
To generate monthly income for investors, SNOY sells call option contracts on SNOW. Due to the fund not directly owning stock in SNOW, written call options will be sold short. To provide additional income and collateral for the covered call strategy, the fund will also hold short-term U.S. Treasury securities.
SNOY is the latest YieldMax ETF to trade in the United States. YieldMax currently has over 25 ETFs trading in the U.S., representing over $3.2 billion in assets under management.
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