Summary I am downgrading MSTY from Buy to Hold due to declining option premiums and falling share price, despite Bitcoin's strength. MSTY's payouts have dropped as MSTR's implied volatility has trended lower, reducing the fund's ability to generate high option income. Competition from Bitcoin spot ETFs, MSTR's new preferred shares, and other companies have drawn investor interest away from MSTR, impacting MSTY's performance. While MSTY's yield remains high, falling volatility levels make it less attractive for my original thesis of harvesting income from a leveraged Bitcoin proxy. The Yieldmax MSTR Option Income Strategy ETF's ( MSTY ) August 29, 2025 payout of $1.0899 per share marks its lowest payout since the fund's inception in February 2024. Share prices have not told a better story either, with MSTY currently trading in the $15 range, down over 65% from its all-time highs of $44. When I last covered MSTY , I had rated the fund as a Buy due to the underlying MSTR's business being minimally affected by tariffs. That rating has now changed to a Hold and we'll discuss why in this article. MSTY is a fund whose performance is driven by trading options, particularly a synthetic covered call strategy on Strategy stock ( MSTR ). Implied volatility ("IV") levels play a major role in options pricing. Since MSTR's IV has continuously been on a downtrend in the last couple of months, MSTY's own ability to generate option premiums for distribution has suffered. At the same time, MSTR's share price has also fallen despite Bitcoin reaching its all-time highs for several reasons. The good news, however, is that regulations toward Bitcoin have softened and a potential interest rate cut this September continue to prop up Bitcoin's value. This will help stabilize MSTR and hence, MSTY, though there aren't immediate catalysts that are likely to drive MSTY's performance upward. Still, the fund's most recent payout offers an annual yield of 83.73% and Bitcoin's value can keep MSTY's performance relatively steady for now. Why MSTY's Payouts Have Fallen For those unfamiliar with Yieldmax's single-ticker covered call ETFs, funds like MSTY employ a synthetic covered call strategy on single stocks, which, in MSTY's case, is MSTR. To create a synthetic long position in MSTR, MSTY will sell a put option using U.S. Treasury bills and cash as collateral and buy a call option at MSTR's existing price. This creates an effect where you have essentially created a position that tracks MSTR's price movements, and hence the term synthetic long position. With this long position in place, MSTY then sells out-of-the-money ("OTM") call options, and in many cases, also buys call options even further OTM to create what traders call a call spread. Now, the reason MSTY's payouts have fallen is because MSTR's IV has been trending lower. For the past few months, MSTR's 30-day IV has hovered between 40-60, which is far lower than the 70-200 range in the eight months prior to May. MSTR Past Year IV30 (Market Chameleon) And as IV levels impact option premiums significantly, MSTY's payouts have naturally correlated with MSTR's IV levels, where MSTY's highest payouts of over $4 per share were around the same time when MSTR's IV levels rose above 200. Data by YCharts Thus, to evaluate the future of MSTY's dividend payouts and performance, we must assess the factors impacting MSTR's performance and IV levels. Why MSTR Has Fallen Despite Bitcoin's All-Time High Unfortunately for MSTY, MSTR's falling volatility levels have not been accompanied by steady growth, but instead, falling share prices. In the last three months, MSTR is down more than 11% and because MSTY fails to always effectively capture upside due to selling covered calls, the fund is down even more at over 24%. All of this is happening when Bitcoin itself has returned positive and reached all-time highs , which has surprised investors, given that MSTR's whole business model revolves around holding Bitcoin. Data by YCharts There are a couple of reasons that can help explain MSTR's slow selloff. The first is a discussion surrounding MSTR's new preferred shares in STRD, STRK, STRF, and STRC. Each one has unique attributes, but all of them pay dividends with yields between 8% and 12%. Given these payouts, people like income investors may find MSTR preferred shares more attractive than MSTR itself and shift money away from MSTR to buy the preferred shares instead. MSTR has also stated that proceeds from issuing new shares may go toward paying dividends on these preferred shares , which could mean fewer Bitcoin acquisitions and more shareholder dilution. In addition to MSTR's preferred shares, new ways to own Bitcoin, particularly in the form of ETFs, and competition from other companies have weakened investor interest in MSTR as a whole. The value of Bitcoin within the iShares Bitcoin Trust ETF ( IBIT ) now exceeds the amount of Bitcoin that MSTR owns at $83.1B versus $71.1B and there are numerous alternative Bitcoin spot ETFs with significant assets under management ("AUM"), too. Quite frankly, Bitcoin spot ETFs have been a much simpler way to gain Bitcoin exposure than MSTR and appeal to investors who don't want to deal with MSTR's risks as an operating company. Another class of investors that may have also turned away from MSTR are high-growth investors who now see that MSTR may be too big to continue generating large returns like before. To get a 2X return on your investment in MSTR, MSTR's market cap would have to increase by nearly $100B. On the other hand, an investment in a company worth $1B would only have to increase its market cap by $1B to double your investment. And given how there have been enough companies that have seen MSTR's success and decided to adopt a similar strategy to create a Top 100 list , many MSTR and former-MSTR investors have plenty of high-growth alternatives to look into. This is especially the case as companies such as Bitmine ( BMNR ) have taken action to separate themselves from MSTR by using MSTR's strategy on different cryptocurrencies, such as Ethereum. Top 100 Public Bitcoin Treasury Companies (BitcoinTreasuries.Net) Combine lower interest in MSTR stock alongside favourable regulations for cryptocurrencies , and you get a situation with MSTY where both NAV and dividend payouts have slowly fallen over the last couple of months. This trend is expected to continue as the next anticipated interest rate cut on September 17 will likely further prop up Bitcoin and MSTR. Lower interest rates will generally lead to more investor interest in Bitcoin as investors look to rotate out of lower-returning assets. But it isn't just the high historical returns that Bitcoin has offered that make it particularly appealing. Its fundamentals as a digital currency with a fixed money supply are attractive during times of inflationary policies, such as cutting interest rates. This stabilization of Bitcoin has led its own IV levels to fall, and a less volatile Bitcoin means MSTR will naturally be less volatile as well. Thus, MSTY will struggle to generate the same distributions as it once did. IBIT IV30 Past Year (Market Chameleon) The Positive For MSTY The good news for MSTY is that Bitcoin stabilization also means that MSTR will generally stabilize its share price. While that means lower dividend payouts from MSTY, MSTY's own NAV will eventually become more stable. Keep in mind that the annual yield from MSTY's most recent distribution still comes out to approximately 84%. Investors should expect distributions to fall, but there are no impending events from Bitcoin and MSTR that are likely to cause a crash in either asset. That said, my original investment thesis with MSTY was to harvest the volatility from a leveraged Bitcoin proxy. As volatility falls in MSTR, so does the attractiveness of my initial investment objective, and hence, I downgrade MSTY's rating to a Hold.
