This Microsoft ETF Pays Weekly Income and Has Lost 34% Since Launch

The use of leverage in investments and trading is a double-edged sword. While leverage can magnify gains when the market is heading in the direction of choice, it can also magnify losses when the market goes against that direction. This especially applies to securities with a high degree of volatility, since their gains and losses can easily fall into the “easy come, easy go” category. 

The Roundhill MSFT WeeklyPay ETF (CBOE: MSFW) is a single stock ETF that provides 1.2x leveraged exposure to tracking Microsoft (NASDAQ: MSFT | MSFT Price Prediction) while generating a weekly dividend income from a swaps strategy. Although the current distribution yield may be an eyebrow raising 26.14% at the time of this writing, the leverage is also bringing it down significantly. Since its inception in July, 2025, MSFW is down -36.21%, while in the same timeframe, MSFT is down -16.15%. 

Roundhill MSFT WeeklyPay ETF

In theory, MSFW attempts to boost MSFT gains by an extra 20% while also generating weekly income payouts of 30%+ yield.  When faced with reality, such has not been the case.

MSFW generates weekly income via swaps agreements and Microsoft common stock, along with US Treasuries. Its active management is the main reason for its pricey 0.99% expense ratio. While the 26% yield sounds attractive, a sizable portion of it has actually been return of capital, as the income generated has been insufficient to pay for the dividend. In fact, when it debuted last year, MSFW started with a 30% yield, which has subsequently fluctuated as in-house capital was drawn down to make each weekly dividend remittance. 

MSFW’s opening price last year was in the mid 40s, got as high as the 50s, and then has steadily fallen to the $30 range at present. This represents the -36.21% price drop; the NAV has eroded proportionately. 

If Microsoft consistently continued to surge, like the Magnificent 7 stocks were wont to do in past years, MSFW might be doing better. However, Microsoft’s switchover to full A.I. has overinflated its capex immensely, and Bank of America, Piper Sandler, and other analysts have revised projections downward. Seeking Alpha estimates that Microsoft is overvalued by as much as 30%, and is expecting a further correction before fair valuation buying should mathematically be justified to resume. 

Given that MSFW’s 1.2x leverage compounds losses as well as gains, there’s a good chance that it will continue to falter until Microsoft is able to officially turn things around with announcements or other breakthroughs to spur a new wave of buying.

Diminished Returns

MSFW’s 1.2x% leverage can magnify and accelerate losses of NAV while paying out high dividends that are essentially a return of capital to investors.

There is an old French short story called, The Man With the Golden Brain, that illustrates the NAV erosion problems of ETFs like MSFW and YieldMax’s MSFO, which uses a synthetic covered call strategy on MSFT to create a similar income stream: 

A baby is born in a rural town and cuts his head as a toddler. His elderly parents are astonished to find that instead of blood, his head leaks liquid gold. As he grows older and matures physically and intellectually, the gold in his head becomes solid and even more valuable. He secretly devises a way to pull gold nuggets from his head to help his family pay for his college and their retirements. 

As he moves into the city, he is lured by fast living, endless partying, and hanger-ons who are attracted by his wealth. As the lifestyle takes its toll on his health, his so-called “friends” even try to steal his gold by attacking him. 

He finally falls in love and marries a woman who loves him for himself. Sadly, she dies unexpectedly. The grief drives him over the edge, and when he finds himself in a store  to buy her a gift, despite her already being buried, he reaches for gold and finds that his brains are gone in scraps of mixed gold and blood.

Just like MSFW – when things are going well for Microsoft, the dividends will flow and the NAV will be solid. When Microsoft falls, NSFW is in danger of not only losing its dividend, but in its intrinsic NAV principal – both of which can erode to zero.  So caution is advised until the Microsoft landscape is back on stable footing.