Netflix fans who want more from the platform’s stock performance have a new exchange-traded fund (ETF) with a unique value proposition.

The newly-launched YieldMax NFLX Option Income Strategy ETF (NFLY) aims to generate monthly income through a synthetic covered call strategy targeting the streaming giant’s stock price. The fund began its first day of trading on the New York Stock Exchange’s Arca on August 8.

NFLY is managed by ZEGA Financial, which has made a name for itself with derivative-based funds. The investment company has several similarly structured income-paying ETFs that track other FAANG stocks, including Google, Amazon, and Meta (formerly Facebook). 

These wrapped, leveraged products try to combine the best of both worlds. The idea is that investors don’t need to make a trade-off when allocating between dividend and growth stocks. With one fund, they get cash payouts on an ongoing basis while also enjoying the long-term growth that tech companies are famous for. Nevertheless, the fund’s performance depends on the underlying stock’s price action to achieve these desired results. Investors may see significant losses under unfavorable market conditions. 

NFLY’s launch comes amid renewed market enthusiasm for Netflix stock.

“Netflix has been one of the stronger performing stocks in the S&P 500,” Todd Rosenbluth, head of research at VettaFi, said. “This new ETF can appeal to growth-oriented investors wanting to also earn income in one package.”

Streaming Back In 

Netflix has been one of this year’s big winners. Its stunning 49% surge has far outpaced both the broad-based S&P 500’s (up 17% year-to-date) and even the tech-focused Nasdaq (up 33%).

While the rebounds of other tech firms have been driven mainly by investor hype around AI, Netflix has been consolidating its core business to further its lead as the US content streaming market reaches saturating point. It has cracked down substantially on password sharing while it offered a cheaper membership tier late last year that exposes viewers to advertising content. 

The platform suffered a steep sell-off after its latest quarterly revenues came up short. Banks had been bullish in the lead-up to its latest earnings report, with UBS revising its price target to $525 and JP Morgan upping its price target to $495 in early July. However, the numbers came up short.

Second-quarter revenue edged up 2.7% from a year earlier to $8.2 billion, about $100 million shy of analysts’ forecasts. Netflix’s updated estimates for its next quarterly earnings also fell short of Wall Street’s expectations.

 The report nonetheless showed strong fundamentals. The giant is continuing to grow its user base, adding six million new members between April and June. Its global now stands at around 240 million. 

“While we’ve made steady progress this year, we have more work to do to reaccelerate our growth,” company management said in its quarterly shareholder letter.

The actively managed fund charges an annualized expense ratio of 99 basis points. 

Netflix is currently swapping hands around the $440 mark, while NFLY fund is currently trading around $20.

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