Summary YieldMax Crypto Industry & Tech Portfolio Option Income ETF offers a massive annual yield of approximately 72.5%, paid weekly to investors. LFGY's share price has dropped 30.4% since inception, but total return including distributions is up 9.8% over the same period. While LFGY's payouts have remained steady so far, they may decline if market indices or fund assets experience sharp or prolonged downturns. Distributions are often a return of capital, offering tax efficiency, but investors must monitor payout composition for potential tax consequences. Overview YieldMax Crypto Industry & Tech Portfolio Option Income ETF ( LFGY ) is one of the high-yielding weekly-paying ETFs available to investors. There is a growing popularity amongst these weekly paying ETFs, and LFGY looks to service this demand by harnessing the volatility of its holdings to reward investors with a massive dividend yield. LFGY is still relatively new and has an inception dating back to January of 2025. The fund has a very reasonable expense ratio of 0.99%, considering the large yield that is paid out to investors. Looking at the performance since the fund's inception at the start of the year, we can see how LFGY's share price has fallen by 30.4%. However, distributions are so large that when including them as part of the fund's return, the total return jumps up to 9.8% over the same period. The whole appeal of LFGY is the large annual distribution rate of approximately 72.5%. Additionally, the fund pays out these distributions on a weekly basis, which makes it an enticing choice for the income-seeking investors that are okay with elevated levels of risk. However, new payouts are declared every single week, so the listed yield may be different based on when you read this article. Data by YCharts Similar to other YieldMax ETFs, LFGY utilizes options to generate the income needed to support this large yield. Since we're talking about a yield this large, I believe that patient investors will be able to substantially reduce their overall risk. Although I love the higher yield that this option ETF can provide, there are some vulnerabilities and risks that investors should be aware of. So let's start by taking a look at the underlying fund strategy that LFGY utilizes to generate its earnings. Fund Strategy Unlike many of the other YieldMax ETFs I have covered in the past, LFGY differentiates itself by operating under a different strategy. My favorite YieldMax fund, is the YieldMax Universe Fund of Option Income ETFs ( YMAX ), because it essentially pools together all of the different funds into one product. However, the underlying positions within YMAX operate a synthetic option strategy, which means that the funds within, don't actually own any common shares of the stocks they are writing options against. This can increase the overall risk of the ETF as the price is likely to be less stable over time. LFGY is unique because it is one of the few high-yield option ETFs that actually hold common shares of the equities they are writing options against. This means that the fund operates in a similar capacity to the widely popular YieldMax Ultra Option Income Strategy ETF ( ULTY ), which I recently issued a buy rating on. The primary difference between LFGY and ULTY is the underlying selection of holdings. LFGY specifically aims to generate option income from a portfolio of companies that are exposed to the crypto markets in some capacity. Looking at the holdings below, we can see that iShares Bitcoin Trust ETF ( IBIT ) is the largest position at 8.98% of assets. This is followed by other notable names such as Coinbase Global ( COIN ), Hut 8 Corp ( HUT ), Robinhood Markets ( HOOD ), Strategy ( MSTR ), and Riot Platforms ( RIOT ) just to name a few. Despite LFGY actually holding common shares of these stocks, I suggest that investors limit their expectations around the ETF's ability to provide a meaningful level of capital appreciation over time. LFGY is best utilized for income generation above anything else. YieldMax It makes sense for LFGY to focus on these crypto-related companies because the strategy needs volatility to generate income. The higher the implied volatility of a holding, the higher the option premiums that can be collected. Although I consider these riskier positions from a growth standpoint, investors are being rewarded with high levels of income for this risk. Although I am bullish on Bitcoin ( BTC-USD ), I am not as bullish on these speculative companies that utilize Bitcoin. To limit this downside risk, LFGY sells collars and put spreads. This basically means that the fund now pairs the traditional call writing with also buying puts or structured put spreads to act as insurance against the underlying stocks. This helps protect against price drops below a certain strike price. While it can soften the impact of declines, it will not stop them completely. The tradeoff of option writing is that upside movement is sacrificed to the selected strike price. Since LFGY also includes some downside protection with the collars and put spreads, the overall net yield is slightly reduced in exchange. Performance & Risks Despite LFGY holding shares of the stocks it is writing options against, investors should not expect the performance to track its underlying positions. Just as an example, I pulled in the performance of LFGY, including all distributions, against the performance of its top positions. As we can see below, LFGY underperforms nearly all of the listed positions, with the exception of MSTR. Therefore, investors need to understand that a high yield doesn't automatically translate to a high return. If you are bullish on any of the underlying positions, you would be better off buying those individual positions instead of LFGY. Data by YCharts Therefore, LFGY presents the risk of underperformance over a longer time frame. The large distributions are likely to be offset by the share price deteriorating over time. Since the use of options limits the level of capital appreciation that can be experienced, LFGY will have trouble recovering its share price over time. Even if markets experience a strong rally, YieldMax funds aren't typically known for their ability to participate in these rallies. Even if they do, the capital appreciation is typically short-lived. Just to provide some further insights into its performance, I believe that a comparison against ULTY and YMAX would be appropriate. ULTY operates a similar strategy but with a different set of holdings. YMAX operates as a 'fund of funds' but is still one of the most diversified choices amongst the YieldMax funds. However, I believe that it would only be fair to measure the performance of these funds starting in April 2025, which is when ULTY implemented its strategy change. Looking at the performance comparison below, we can see that LFGY has outperformed both ULTY and YMAX since April. Data by YCharts Since LFGY is focused on crypto businesses, the fund is likely to share some of the sensitivity to shifts in the price of Bitcoin. Since the fund's operating history is so limited, we haven't been able to experience how closely linked LFGY is to Bitcoin. However, I remain cautious about a significant pullback in the price of Bitcoin and how it will negatively impact LFGY's share price and the ability to sustain its current payouts. I believe that the correlation may not be as clear right now because Bitcoin has continued to hover near its highs. Data by YCharts Distribution Utility According to the latest declared weekly distribution of $0.512 per share, the estimated annual yield sits above 72% at this time. One of the biggest issues I've had with many of the YieldMax funds is that their payouts tend to trend downward over time, especially after their share price has experienced some mild deterioration. However, LFGY differentiates itself by providing shareholders with a very steady range of payouts since the fund's inception. The fund launched shortly before the market's rapid decline back in March, which is why we can see payouts slightly declining at the start of the graph below. Seeking Alpha Admittedly, this payout stability can change at any moment, so I would still advise caution. The payouts can shift based on the fund's underlying success with its option strategy or just based on the overall momentum of the market or its holdings. I believe that either a sharp or prolonged period of decline in market indices will result in LFGY's payouts being reduced over time. As the fund's net assets decrease, so will the payouts. This is a trend that has been observed throughout many different YieldMax funds. Although LFGY holds common shares of the underlying equities that it writes options against, I still believe that the payouts can decline. Despite these risks, investors like myself will always be interested in a fund that offers a distribution rate as high as this. In theory, this large yield provides investors with the possibility of reaching house money status, which is the point where your initially invested capital has been fully repaid through distributions alone. Just to demonstrate this concept, we can use some basic napkin math. Assume that we have $10,000 invested at a 72.5% distribution rate. $10,000 x 72.5% = an estimated annual income of ~$7,250. Therefore, investors will be able to eventually collect their initial capital back in a little over a year. The unfortunate part is that it requires a longer holding period to reach this point. Since many of the underlying holdings are extremely volatile and have some sort of indirect exposure to the crypto markets, there's always a chance that LFGY is impacted by a pullback in these riskier assets. On a more positive note, LFGY typically pays out these large distributions using return of capital . Return of capital distributions aren't considered income and, therefore, aren't taxed as such. Instead, a return of capital distribution lowers an investor's cost basis, and this allows taxes to be deferred until the time of sale. So it is possible to hold a position in LFGY long enough for your cost basis to reach $0 per share. At this point, all of the income received going forward would be classified as long-term capital gains, which are considered to be qualified dividend income and are more tax-efficient. YieldMax Distribution Email However, it's worth noting that the distributions aren't always paid out using return of capital. For instance, this week's payout contained no return of capital, which means that investors will see tax consequences from all of the income received here. Therefore, it's important to meticulously track the weekly distributions and how they are being funded, so that you can properly estimate the tax bill at the end of the year. I would highly suggest going to the YieldMax site and using their contact form to request being added to the distribution list. Takeaway In conclusion, I rate LFGY as a buy at this time due to the high-income potential and the fund's ability to keep payouts consistent since its inception. I like the fact that LFGY actually holds common shares of the equities that it writes options against. This helps reduce the risks related to synthetic options, which many other YieldMax funds utilize. Additionally, LFGY implements strategy collars and put spreads to minimize the downside risk. Despite this, investors should still consider the risks of LFGY's crypto-related portfolio of holdings. As Bitcoin remains near its all-time highs, the fund's payouts and performance have been great. However, this consistency may change if the Bitcoin cycle shifts and there's a large pullback.
