I Just Bought 100 More Shares of ULTY at $6.22 – Should I Buy More?

It seems like more than just a handful of income investors on social media seem to view YieldMax ETFs as one of the best new things to hit the ETF scene in a while. Undoubtedly, these are exotic and exciting yield-heavy ETFs that seem to be “innovating” in ways that most traditional ETF providers haven’t. Indeed, covered call or premium income ETFs have been all the rage for those seeking a bit more of a yield boost. And while they’re great options to beef up the passive income, YieldMax ETFs, I think, seem to take things to the next level. 

In a recent Reddit post I stumbled upon, the original poster asked the r/YieldMax subreddit if they should make the most of the recent dip in the YieldMax Ultra Option Income Strategy ETF (NYSEARCA:ULTY) on recent weakness.

The ULTY takes the yield into overdrive

Indeed, that’s quite a mouthful for an ETF. And while it’s more complex than your traditional, vanilla index ETF, I do find it to be quite an interesting tactical play for brave income investors who aren’t afraid to take on more risk for a shot at a fatter paycheck at the end of the month. Though the yield will vary, the payout is sure to be magnitudes higher than what’s provided by just about any other equity ETF on the market.

At the time of writing, shares of ULTY yield just north of 87%. And no, that’s not a typo! In any case, investors should understand what the ULTY is and not just buy any dip blindly because the yield is in the triple digits. 

So, what exactly is the ULTY ETF? And should yield-hungry investors be inclined to jump in on weakness? In short, the ULTY is a very unique and intriguing actively-managed ETF that sells call options on shares of some hyper-volatile stocks (mostly tech names with high betas).

It’s a very interesting strategy that may just work for investors who are fans of the strategy that may, on paper, do well on the front of total returns (capital gains + yield) in these early innings of an AI-driven bull market. Of course, yield is going to be doing most of the heavy lifting for the ULTY and most other YieldMax ETFs, unlike most other securities.

The ULTY is an intriguing tactical income play for those who know what they’re getting into

It’s an interesting angle, to say the least. But as a relatively new ETF, time will tell how things end for investors. The yield has been rich, but shares are down around 69% from their peak. If you have disposable capital to risk and are interested in this complex yet intriguing instrument, shares could be worth careful consideration at around $6 and change per share, a level our Reddit user punched their latest ticket.

That said, investors should put in the due diligence and ensure the rest of their portfolio is well-diversified. In short, ULTY is an income play on steroids. It has a good shot of working out if shares that the ETF writes covered calls against continue moving choppily higher. But as is the case with most high-reward securities, there are downside risks to consider. 

In short, I’d encourage our Reddit user to understand the inner workings of the ETF before picking up shares. Are they just in it for the yield? Or are they looking for a unique way to trade the recent bullish action and volatility in the tech sector from a different angle?