On Tuesday, YieldMax launched its newest option fund, the YieldMax PLTR Option Income Strategy ETF (PLTY ).
PLTY aims to offer current income for its investors. As an additional goal, the fund also seeks exposure to the share price of Palantir Technologies Inc. (PLTR).
The ETF is actively managed, with a net expense ratio of 0.99%. To generate both income and indirect exposure to Palantir’s share price return, PLTY employs a synthetic covered call strategy.
Synthetic Covered Call Strategy by YieldMax
To make the synthetic covered call strategy work, the fund buys and sells a mix of call and put option contracts based on PLTR’s price returns. These option contracts may be either standardized exchange traded or FLEX options.
PLTY does not directly own Palantir stock. As such, call options written on PLTR will be sold short. While this strategy allows the fund to participate in some of Palantir’s share price gains, PLTY’s corresponding momentum may be limited to a cap.
As an additional means to generate returns, PLTY may instead opt to sell a credit call spread over a call option. This may be employed opportunistically when the fund’s subadvisor, ZEGA Financial, believes it to be a more beneficial move at the time.
Along with a suite of call and put options, PLTY also uses short-term U.S. Treasury securities. These Treasury securities are used as collateral for the fund’s covered call strategy. Additionally, the U.S. Treasury securities may also help the fund receive additional income.
Income from this fund comes through monthly cash distributions. Along with the aforementioned U.S. Treasury securities, PLTY gains option premiums through writing option contracts on PLTR.
YieldMax possesses immense experience in piloting option-based income strategies on single stocks. One of the largest YieldMax funds, the YieldMax Coin Option Income Strategy ETF (CONY ), has over $616 million in assets under management.
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