On Thursday, YieldMax expanded its single-stock option ETF library with the launch of the YieldMax CVNA Option Income Strategy ETF (CVNY ).
CVNY is an actively managed fund with a primary goal of providing current income to investors. Secondarily, the fund also looks to provide exposure to changes in Carvana’s (CVNA) share price. Much like other available YieldMax ETFs, this fund has a net expense ratio of 99 basis points.
The crux of CVNY’s investment plan comes from YieldMax’s synthetic covered call strategy. Ideally, the covered call strategy should be able to simultaneously provide income and indirect exposure to Carvana’s share price returns.
In regards to the covered call strategy, CVNY will buy and sell a mix of call and put option contracts. These contracts are based on Carvana’s price returns, and may be standardized exchange-traded or FLEX options.
Building Long Exposure via Options
By simultaneously buying call options while selling put options, the fund should be able to provide synthetic long exposure to Carvana. This lets the fund more closely mimic the price movements of Carvana’s daily stock performance.
Options employed by the fund will traditionally have terms that last between one and six months. Additionally, CVNY will at times opt to sell a credit call spread in lieu of a call option. This may be done at times when the fund managers believe credit call spreads to be a more beneficial choice.
Similarly to that of other YieldMax single-stock funds, CVNY may also hold short-term U.S. Treasury securities. These securities are primarily held as collateral for the call strategy, though they may also help bolster fund income.
Though the stock has struggled at times, Carvana has seen a large return to form over the last year. As such, investors may wish to utilize CVNY as a means to cash in on the car retailer’s comeback performance.
YieldMax currently has more than 40 ETFs listed in the United States. Many of these funds utilize YieldMax’s single-stock option strategy to good results. As a whole, YieldMax’s ETFs account for over $9.3 billion in assets under management.
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