YieldMax COIN Option Income Strategy ETF (CONY) Review: A Massive 96.5% Yield With Huge Upside Potential

I strongly believe that we are in one of the absolute best times in modern history to be an income focused investor. There is such an abundance of

BlackJack3D discusses YieldMax COIN Option Income Strategy ETF (NYSEARCA:CONY) in this Seeking Alpha article. Here are the key points:

- CONY offers a massive 96.5% yield, according to YieldMax's website.

- YieldMax has launched a plethora of these high-yielding funds over the last twelve months, and CONY is the author's strongest conviction fund out of them all.

- CONY has a total annual fund operating expense of 1.01% and is actively advised by Tidal Investments and sub-advised by ZEGA Financial. The fund's primary objective is to seek current income. The fund does this by implementing an option strategy.

- According to the fund's prospectus, CONY is an actively managed ETF that seeks current income off of its exposure to Coinbase Global (COIN).

- CONA strategically uses synthetic call options to generate income from the indirect exposure to COIN.

- A downside of the option strategy is that the upside is effectively capped.

- Due to the at-the-money option structure, the price upside is limited at whatever the strike price is.

- As an example, if CONY sets a strike price of $250 on the underlying stock of COIN, which currently trades at $242 per share, if the price appreciates to $260 per share, the option would execute at the $250 price and CONY's upside would be capped here.

- This means that CONY holders would miss out on the additional upside which the underlying COIN stock experienced.

- However, there are no downside caps here and CONY would experience the full impact of COIN falling in share price.

- This makes timing buys very important with a fund like this.

- Taking a look at the full prospectus, the author located a very handy breakdown of the different types of option strategies that the fund may use.

- The use of call and put options are implemented here on maturity targets ranging between one and six months.

- Even though CONY doesn't actually hold common shares of COIN within the fund, it can still benefit from its upward price movement.

- The author believes that we are yet to see the upside of the prior catalyst within the crypto market: the Bitcoin (BTC-USD) halving.

- Just to provide a short summary, the Bitcoin halving event occurs every four years within the Bitcoin network.

- The significance of this event is that the reward supply essentially gets cut in half for the miners who contribute to new blocks.

- The goal of this process is to effectively reduce the rate at which new Bitcoins are created so that the total supply of Bitcoins is limited to twenty-one million.

- Since this process limits the supply, it acts as a deflationary measure relying on the principles of scarcity.

- As the supply slowly becomes more limited over time, this assumption is that this will lead to increasing prices and demand.

- To help paint a picture, this is similar to the same concept that plays out with housing: as the supply decreases, demand typically increases alongside the value of homes.

- The data clearly tells us that this is the trend with Bitcoin following every instance of a halving event over the last decade.

- Taking a look at the chart above, we can see each halving indicated by the green vertical lines in 2013, 2016, 2020, and 2024.

- As described, we can see that shortly after every single halving event, the price quickly moved to the upside.

- While we can't always rely on past events to carry into the future, this trend has never been disrupted, and it backed by basic economic principles of supply and demand.

- As we can see, the most recent halving even happened this year in 2024 and the price of Bitcoin has yet to take off to the upside.

- While the author cannot provide any specific predictions on how high Bitcoin will go, they do think that CONY will be a unique vehicle to benefit from the rise.

- Not only will we capture some price appreciate, but we would also get paid some high income while we wait.

- The author would strongly recommend reading VanEck's in-depth article that dives into some long-term valuation estimates for Bitcoin.

- The most recent source that the author could locate suggests that Coinbase owns about $25B in Bitcoin.

- As a result of the exposure, the price of COIN has naturally followed the general price trend of Bitcoin.

- As seen from the graph below, the price movement history looks almost identical.

- Therefore, it isn't too unusual to expect COIN's stock price to shoot up alongside Bitcoin's price once the halving effect kicks in.

- After all, we've already seen COIN's stock price increase over 1

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