CONY: Poorly Managed, Not Worth The Fees - Sell

Summary The YieldMax COIN Option Income Strategy ETF aims to provide high income by selling call options on Coinbase ￰0￱ is expanding into financial services and stablecoins, which could drive long-term growth, but crypto volatility remains a key risk. CONY's strategy of covered calls has capped upside, and recent performance lagged COIN, raising concerns about management's strategy ￰1￱ the high expense ratio and lack of evidence for effective options management, we rate CONY as a sell despite its appealing ￰2￱ The YieldMax COIN Option Income Strategy ETF (CONY) is a fund that seeks to provide consistent income derived from the monthly selling of call options on the underlying company, ￰3￱ ETF pursues a strategy that gives investors strong yields on their investment while getting some exposure to the COIN price ￰4￱ refer to the below for some key facts about the fund, taken from the ￰5￱ The average volume is 18.2M , which is very liquid.

Below, we will examine some of the latest news from the underlying security, COIN, and review some of the factors that could make COIN and CONY ￰6￱ Recent News Coinbase is investing heavily in partner firms and the broader financial ecosystem Recently, Coinbase partnered with Cardless, a firm that raised $60M in their Series C to transform the credit card ￰7￱ platform focuses on APIs and plug and play components to build a product for users that can drive faster decisioning, personalized offers to clients, and faster ￰8￱ goes hand in hand with the recent release of the Coinbase One credit card , which gives users 4% back in bitcoin on all ￰9￱ is a sign that COIN is looking to diversify in the financial services space and expand out from their roots of purely ￰10￱ view this as an example of something to keep an eye on, as new announcements like this could move the markets and cause the underlying shares to move in a very volatile ￰11￱ is expanding further into stablecoins, which have strong financial institution use case possibilities The firm revealed participation in a stablecoin infrastructure company called Bastion in their $14.6M funding ￰12￱ firm is developing a platform that allows companies to issue stablecoins without having to secure their own licenses or build custom routing and infrastructure, and we believe that this is big ￰13￱ stablecoin platform Circle IPO’ed this summer, and investors have been looking to get exposure through them for stablecoin ￰14￱ view this as strong potential for Coinbase—there have been reports that institutions and corporate investors and treasuries are looking to expand their exposure to ￰15￱ Coinbase can take a larger slice of this pie and become more diversified in their client base outside of retail, this could be a boon for the ￰16￱ leadership is very bullish on Bitcoin, and if their forecasts pan out, there will be a high volume of user activity on the platform Naturally, the CEO of Coinbase, Brian Armstrong, is very bullish on the future price action of ￰17￱ believe that his sky-high valuation for the cryptocurrency is rooted in supply/demand fundamentals, but no matter which way you stand on the price of Bitcoin, it is to be expected that if the price of the most popular cryptocurrency goes up dramatically, there should be a corresponding spike in Coin users.

Further, with the current administration being so open to cryptocurrencies, the next few years should remain a positive environment for all things related to crypto, and this should be a positive for the firm overall as ￰18￱ remains imperative that the firm continue to expand and meet its operating goals, as competition could very easily heat up in this space amidst this very bullish environment and ￰19￱ Strategy YieldMax does not purchase shares of COIN directly. Instead, they trade options contracts in a manner that returns mimic the price movement of ￰20￱ is called “synthetically owning COIN”. For our purposes, we will assume the fund owns COIN directly as the effects are largely the ￰21￱ getting synthetic exposure to COIN, YieldMax employs one of 2 strategies: Selling Covered ￰22￱ a Covered Call Spread.

Let’s explore the “Selling Covered Calls” strategy ￰23￱ this strategy, the fund will sell call options that have a strike price higher than the current price of ￰24￱ visualize we look at the following example: We own 100 shares of COIN purchased at $50. The current price is also $50. We sell a call option on COIN with a strike price of $60 and a total premium of $200. With this scenario, we chart out our total gains that we will see with and without the option: Doodad Capital We see that for lower prices of COIN, the covered call strategy is slightly ￰25￱ is because at prices under $60 (the strike price of the option), the option will not be ￰26￱ your returns will mimic COIN returns, but with an additional $200 you made from selling the ￰27￱ COIN increases past $160, your returns from the covered call strategy flatten out and the shares-only strategy quickly becomes ￰28￱ is because after COIN increases past $160, the option will be exercised so you would sell all the shares of COIN for $60.

The line flattens out because after exercise you no longer own the option or the shares so there is no change in ￰29￱ we see, this strategy is good for investors who want to reduce downside risk and believe that COIN will not increase by a large amount before the option ￰30￱ let’s look at selling a covered call spread ￰31￱ this strategy, you would buy a call option with a strike price that is above the current price of COIN and then sell a call option that has a higher strike than the first one. Again, let’s use an example to illustrate: We own 100 shares of COIN purchased at $50. The current price is also $50. We buy a $60 strike call option for $200.

We sell an $80 strike call option for $100. Doodad Capital We see here that at generally lower prices, the shares-only strategy is slightly ￰32￱ is because at prices below the strike prices of the options, the options will not be ￰33￱ your returns will mimic the returns of COIN plus the net proceeds from the call ￰34￱ net proceeds are the total value of premiums earned/spent. Since the call option you buy is at a lower strike price, it will cost more than the premium you get from the call option you ￰35￱ this case, the net proceeds are $200 - $100 = $100. After the price of COIN hits the strike of the purchased call option (in this case $60), you would exercise that option and would then own 100 additional shares of ￰36￱ is why the line gets steeper—because you now own double the ￰37￱ COIN increases past the next call option (in this case $80), the purchaser of that call option will exercise, so you will effectively sell 100 shares of COIN at $80 ￰38￱ line gets shallower here because the number of shares you own gets halved, back to the original $100.

We see that this strategy is good to use when you believe that COIN will increase in value above the lower call strike (technically, a little above that to offset the loss from the options proceeds). This strategy is also relatively helpful on the downside. Yes, you will lose more money than you would with the shares-only strategy. However, that difference in loss is capped at -$100 (the net proceeds).

Other options strategies have a much larger loss on the ￰39￱ recap, the CONY will use the covered call strategy when it believes COIN will decline in value or only increase by a modest ￰40￱ CONY believes COIN has a lot of upside potential, it will use the covered call spread strategy so that gains are not ￰41￱ We look at the performance of CONY over the past year compared to ￰42￱ Alpha We see that while COIN increased by 84%, CONY only increased by 31%. This is likely due to the capped gains from the covered call ￰43￱ see that while COIN had a downtrend from February 2025 until early April, the returns of CONY caught up with the returns of ￰44￱ can be explained by the left side of the covered call strategy chart we explored ￰45￱ that strategy, when COIN goes down, you also lose value, but less ￰46￱ also see that in the uptrend for COIN from April 2025 through mid-July 2025, the performance of COIN outpaced the performance of ￰47￱ is likely due to the nature of the covered call strategy where your gains are capped after COIN increases above a certain ￰48￱ A sharp drop in Bitcoin and other major cryptocurrencies could lead to adverse returns for COIN and CONY If major cryptos lose a significant amount of value in a short-term period, which is highly possible given the volatility of the market, it could cause COIN to underperform, which could negatively impact CONY as ￰49￱ is a risk that all investors with any exposure to the crypto markets should be aware ￰50￱ expense ratio could lead to negative returns because of the erosion of the already slim margins over the underlying Per the first graph above, we can see that CONY outperforms holding COIN outright by only a slim margin under a certain price point, and since the expense ratio is pretty high at 0.99%, it eats away at these already paper-thin ￰51￱ could definitely cause CONY investors to look for alternatives, which could be a risk to stay aware ￰52￱ Coinbase has been steadily expanding its financial services portfolio beyond that of just retail trading of cryptocurrencies, and these include partnerships with innovative card product firms and stablecoin ￰53￱ also benefits from higher general interest in cryptos and should benefit from the backdrop of this crypto-friendly administration.

However, after reviewing the performance of CONY compared to COIN, we question the management's ability to correctly employ their options ￰54￱ instead of the covered call strategy, the fund had used the covered call spread strategy during the uptrend starting in April 2025, the performance of CONY would have been much better, and possibly even higher than that of ￰55￱ the fund claims to potentially use either of the 2 strategies depending on the market conditions, the performance over the past 1 year only shows evidence of the covered call strategy being used, even when the covered call spread strategy would have been much ￰56￱ general, we like the strategy of CONY on paper.

However, we do not see evidence of effective management of the ￰57￱ is disappointing to see for a fund with such a high expense ￰58￱ a result, at this time we rate CONY as a sell.