Today, YieldMax launched its newest ETF, the YieldMax MARA Option Income Strategy ETF.
MARO has two investment objectives. The primary goal for the fund is to provide current income for its investors. Additionally, MARO will aim to gain exposure to the share price of MARA Holdings (MARA) as a secondary objective.
Much like other YieldMax ETFs on the market, MARO is an actively managed fund. The fund has a net expense ratio of 0.99%.
The YieldMax Covered Call Strategy
To accomplish its dual investment objectives, MARO applies a synthetic covered call strategy. This strategy has the fund buying and selling a mix of call and put options on the price returns for MARA’s stock. These options may be standardized exchange-traded or FLEX Options.
The synthetic long exposure for the fund is built by simultaneously buying and selling call and put options on MARA. This is done to replicate the price movements on the company stock. Options bought and sold by the fund generally have terms that last between one to six months.
Call options sold by MARO help the fund generate income for investors. Given that the fund does not directly own MARA stock, these call options are sold short.
Even though MARO can offer capital appreciation based on MARA’s share price movements, that upside may be limited. This is due to the strategic nature of the synthetic covered call strategy.
However, the portfolio team behind MARO may opt to sell credit call spreads to gain better participation to changes in MARA’s share price. This may be done in instances where ZEGA Financial, the fund’s subadvisor, expects MARA’s share price to see a significant jump soon.
As collateral for its covered call strategy, MARO will also hold short-term U.S. Treasury securities. These Treasuries can also offer the potential for even more income for the fund.
The release of MARO highlights YieldMax’s innovations in launching new ETFs with options strategies. Another recent YieldMax ETF, the YieldMax Target 12 Semiconductor Option Income ETF (SOXY ), debuted earlier in December.
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