Summary YieldMax Bitcoin Option Income Strategy ETF has underperformed compared to its peers and a simple profit-taking strategy in Bitcoin spot ETFs since its inception. YBIT's synthetic covered call strategy limits upside potential, resulting in flat returns since it launched despite Bitcoin's significant gains. YBIT has also lagged behind more traditional income products like T-bills and corporate bonds, questioning its viability as an income investment. Given its performance, I see no compelling reason to choose YBIT over alternative investment options for income or Bitcoin exposure. After providing Seeking Alpha readers with my favorite way to play the Bitcoin ( BTC-USD ) rise to $100,000 per coin back in early-November, the long-awaited psychological six-figure number has come and gone not once, but twice. More recently, through coverage of the Grayscale Bitcoin Trust ETF ( GBTC ) and the Bitwise Bitcoin ETF ( BITB ), I've explored how close we might be to a price top for this cycle and the recent trends in network scaling and development . My current view is that Bitcoin's 2024 halving epoch has yet to reach its price climax. Today, we're going to take a different angle on Bitcoin's potential rise to new highs in 2025; how to not play that move. YieldMax Bitcoin Option Income Strategy YieldMax products have become increasingly more popular in recent years, specifically with investors who want 'high-yielding' income products. I've explored several of these products in the past and I think it would be accurate to call my coverage of these types of funds somewhat polarizing. Some of the critiques of my YieldMax fund analysis have been fair and other critiques much less so, from where I sit. In my initial coverage of the YieldMax Bitcoin Option Income Strategy ETF ( YBIT ) we'll assess whether or not the fund fails against three different strategies. First, the fund details: Inception: 4//22/24 Expense Ratio: 0.99% AUM: $110 million 30 Day SEC Yield: 1.92% Rather than simply buying and holding Bitcoin, the YieldMax Bitcoin Option Income Strategy ETF utilizes a synthetic covered call strategy to produce income for shareholders as a primary objective. The secondary objective of the fund is to offer exposure to the share price gains from the Bitcoin investment products that the fund trades through the aforementioned options. Though it should be noted that upside is limited due to the nature of the covered call strategy. Data by YCharts The fund does indeed pay out large monthly dividends to shareholders. The question is whether or not the total return to shareholders justifies investment. Performance Against BTC Income Peers YieldMax is not the only fund that aims to provide investors income from Bitcoin options strategies. Other such funds include the Simplify Bitcoin Strategy PLUS Income ETF ( MAXI ), the NEOS Bitcoin High Income ETF ( BTCI ), and the Roundhill Bitcoin Covered Call Strategy ETF ( YBTC ). Of these funds, YBIT is among the newest having less than a year in the market: Fund Details YBIT MAXI BTCI YBTC Inception 04/22/2024 09/29/2022 10/16/2024 01/17/2024 Expense Ratio 0.99% 6.10% 0.98% 0.95% AUM $110.17M $56.92M $49.00M $93.89M Source: Seeking Alpha One clear standout from this table is the enormous expense ratio from MAXI. As far as I can tell, this is due to that fund having a far more complex strategy than the other three products. Given such a large management fee, one might reasonably expect YBIT to outperform MAXI over time. So far, that has simply not been the case: Total Return (Seeking Alpha) Since inception, YBIT investors are flat while each of the competing high-yield Bitcoin options ETFs have generated more than a 20% total return. Not only has YBIT under-performed against MAXI since YBIT's April inception, but it has also failed to keep up with BTCI and more recently with YBTC. And again, this is showing total return, not price performance. Anyone who bought YBIT the day it was launched has essentially broken even, in spite of Bitcoin returning over 38% over the same time period. Of course, not every YBIT shareholder bought the fund the day it launched. Even for savvy investors who opportunistically bought the early-September price low, the fund has under-performed: Data by YCharts Comparing YieldMax funds to the underlying assets used in the options strategy has been a point of some contention. The chart above shows that YBIT has under-performed both Bitcoin and MAXI - the latter of which is a fund that figures to be competing with YBIT for the same type of investor. Here's an important question that I would challenge fans of these instruments to consider; if nailing bottoms in the price of the underlying asset is such an important determining factor in generating a total return that will still ultimately lag the underlying asset, what is the point of buying the income instrument? Performance Against A Simple Profit-Taking Strategy In the comments section of my last YieldMax article, Jamie Ellis had what I felt to be the most fair critique of my analysis. He and I seem to have an agreement on the very real draw-down risk of funds like YBIT. In that critique, he raised a very interesting point about how these funds compare to profit-taking strategies in the underlying assets. For instance, we know how YBIT has performed since its inception and more recently since Bitcoin's September lows. What is less obvious is whether or not YBIT total returns have outperformed a basic profit-taking strategy in a similarly weighted iShares Bitcoin ETF ( IBIT ) position. The table below assumes an initial investment of $100,000 in YBIT shares at the closing price of $20.45 on April 23rd, 2024 for 4,890 shares. Our YBIT share count remains consistent, but in the far right column I'm showing the month end total value of the investment of those 4,890 shares with the cumulative dividend payouts from each month. YBIT Month End Closing Share Price Position Value YBIT Payout Share Value + Cumulative Payouts April $18.55 $90,709 $0 $90,709 May $20.57 $100,587 $0 $100,587 June $17.01 $83,178 $6,703 $89,881 July $16.28 $79,609 $5,948 $92,260 August $13.80 $67,482 $3,279 $83,411 September $13.78 $67,384 $3,529 $86,842 October $12.25 $59,902 $7,185 $86,545 November $13.85 $67,726 $6,183 $100,552 December $12.37 $60,489 $3,466 $96,781 Source: YieldMax, Seeking Alpha, Author's Calculations Simply taking the distributions from holding YBIT would have resulted in a small investment loss at the end of 2024 with share value and cumulative payouts totaling under $97,000 - below the initial $100,000 investment in April. And this is before any potential taxes on distributions. How would investors have performed if they instead bought $100,000 in IBIT and reduced their positions by 3% each month on the day of YBIT's ex-dividend date? In the table below, we're assuming 2,638 shares of IBIT purchased at $37.90 in April. YBIT Ex-Div Date IBIT Share Close IBIT Share Value at Ex-Date 3% IBIT Reduction New Share Count 6/6/24 $40.16 $105,963 $3,179 2559 7/5/24 $32.20 $82,412 $2,549 2480 8/7/24 $31.19 $77,358 $2,321 2406 9/6/24 $30.41 $73,161 $2,195 2334 10/3/24 $34.72 $81,024 $2,431 2264 10/31/24 $39.78 $90,047 $2,701 2196 11/29/27 $55.21 $121,225 $3,637 2130 12/27/24 $53.68 $114,330 $3,430 2066 Source: YieldMax, Seeking Alpha, Author's Calculations At the end of December, the remaining 2,066 shares of IBIT had a market value of over $109k dollars. This is in addition to the $22.4k in cumulative sales from our 3% reductions on YBIT's ex-divi dates. Even if we get more aggressive and reduce IBIT positions by 6% on YBIT ex-dividend days, we still get a better total return in the IBIT position: YBIT Ex-Div Date IBIT Share Close IBIT Share Value at Ex-Date 6% IBIT Reduction New Share Count 6/6/24 $40.16 $105,963 $6,358 2480 7/5/24 $32.20 $79,863 $5,098 2322 8/7/24 $31.19 $72,420 $4,345 2183 9/6/24 $30.41 $66,372 $3,982 2052 10/3/24 $34.72 $71,233 $4,274 1929 10/31/24 $39.78 $76,717 $4,603 1813 11/29/27 $55.21 $100,086 $6,005 1704 12/27/24 $53.68 $91,473 $5,488 1602 Source: YieldMax, Seeking Alpha, Author's Calculations The 1,602 remaining shares at the end of December have a valuation of $85k, and we've locked in over $40k in realized sales. I must stress that we're not re-investing the dividends from YBIT in this exercise. Doing so would defeat the purpose of comparing YBIT distributions to a profit-taking strategy in a spot ETF. Furthermore, if an investor was actually utilizing the dividend payments from YBIT as a genuine form of income, we shouldn't expect reinvestment anyway, in my estimation. To be fair to YBIT, trading and dividend history for this fund are limited since it is less than a year old. Additionally, most investors likely did not purchase YBIT on launch day. Some have perhaps been lucky enough to buy the lows. While we don't have the amount of data we'd likely want to draw a definitive conclusion on this, so far it has clearly made more sense to take off chunks in IBIT for income rather than holding YBIT since inception, dollars being equal. Especially if one is holding these products in a tax-advantaged account. Performance Against More Traditional 'Income' Now that we can see YBIT has under-performed against both similar products from peers and a simple profit-taking strategy through a spot ETF, we can add a third method for good measure; YBIT vs more traditional income products. To be clear, I've long-held the view that calling YieldMax products 'income investments' is generous. Rather, my view has been that these are raw speculative investments masquerading as income products. But, if we wish to consider a fund that has broken even after eight and half months of market performance to an 'income product,' let's compare YBIT to T-bills and corporate bonds: Data by YCharts The chart above shows the performance of YBIT against the WisdomTree Floating Rate Treasury Fund ( USFR ) and the iShares iBoxx $ High Yield Corporate Bond ETF ( HYG ). YBIT Holdings as of 1/10/25 (YieldMax) Despite more than half of the YBIT NAV currently sitting in government debt, I happen to think HYG is the far better comp here because the market price of the fund has far more fluctuation on a day-to-day basis than that of USFR. Regardless, YBIT has under-performed both corporate bonds and short term T-bills since its April inception from a total return standpoint. Closing Summary No matter which barometer you choose, YBIT has not been a lucrative investment product. I'll offer some self-reflection; I think one of the mistakes I've made in covering YieldMax products in the past is that I've come off as telling people what to do or what to think. That is not my intention. I'm just sharing what I do and how I think. Readers seemed particularly triggered by my statement that the YieldMax COIN Option Income Strategy ETF ( CONY ) was "not suitable for income investors." Surely, that's my opinion and other investors may feel differently. But I can't imagine income investors want their high-income investments to occasionally sniff 30% total losses within 5 months of purchase. That is the risk in funds like YBIT. The fund loses against more traditional income funds. It loses against other Bitcoin options income funds. And it loses against a scheduled profit taking strategy from longing Bitcoin through spot ETFs. I'm failing to see a good reason to long YBIT over alternatives.
