LFGY: A Suitable Crypto-Focused Alternative To ULTY

Summary YieldMax Crypto Industry & Tech Portfolio Option Income ETF offers a massive annual yield of approximately 72.5%, paid weekly to investors. LFGY's share price has dropped 30.4% since inception, but total return including distributions is up 9.8% over the same ￰0￱ LFGY's payouts have remained steady so far, they may decline if market indices or fund assets experience sharp or prolonged ￰1￱ are often a return of capital, offering tax efficiency, but investors must monitor payout composition for potential tax ￰2￱ YieldMax Crypto Industry & Tech Portfolio Option Income ETF ( LFGY ) is one of the high-yielding weekly-paying ETFs available to ￰3￱ is a growing popularity amongst these weekly paying ETFs, and LFGY looks to service this demand by harnessing the volatility of its holdings to reward investors with a massive dividend ￰4￱ is still relatively new and has an inception dating back to January of ￰5￱ fund has a very reasonable expense ratio of 0.99%, considering the large yield that is paid out to ￰6￱ at the performance since the fund's inception at the start of the year, we can see how LFGY's share price has fallen by 30.4%.

However, distributions are so large that when including them as part of the fund's return, the total return jumps up to 9.8% over the same ￰7￱ whole appeal of LFGY is the large annual distribution rate of approximately 72.5%. Additionally, the fund pays out these distributions on a weekly basis, which makes it an enticing choice for the income-seeking investors that are okay with elevated levels of risk. However, new payouts are declared every single week, so the listed yield may be different based on when you read this ￰8￱ by YCharts Similar to other YieldMax ETFs, LFGY utilizes options to generate the income needed to support this large ￰9￱ we're talking about a yield this large, I believe that patient investors will be able to substantially reduce their overall ￰10￱ I love the higher yield that this option ETF can provide, there are some vulnerabilities and risks that investors should be aware ￰11￱ let's start by taking a look at the underlying fund strategy that LFGY utilizes to generate its ￰12￱ Strategy Unlike many of the other YieldMax ETFs I have covered in the past, LFGY differentiates itself by operating under a different ￰13￱ favorite YieldMax fund, is the YieldMax Universe Fund of Option Income ETFs ( YMAX ), because it essentially pools together all of the different funds into one product.

However, the underlying positions within YMAX operate a synthetic option strategy, which means that the funds within, don't actually own any common shares of the stocks they are writing options ￰14￱ can increase the overall risk of the ETF as the price is likely to be less stable over ￰15￱ is unique because it is one of the few high-yield option ETFs that actually hold common shares of the equities they are writing options ￰16￱ means that the fund operates in a similar capacity to the widely popular YieldMax Ultra Option Income Strategy ETF ( ULTY ), which I recently issued a buy rating ￰17￱ primary difference between LFGY and ULTY is the underlying selection of ￰18￱ specifically aims to generate option income from a portfolio of companies that are exposed to the crypto markets in some ￰19￱ at the holdings below, we can see that iShares Bitcoin Trust ETF ( IBIT ) is the largest position at 8.98% of ￰20￱ is followed by other notable names such as Coinbase Global ( COIN ), Hut 8 Corp ( HUT ), Robinhood Markets ( HOOD ), Strategy ( MSTR ), and Riot Platforms ( RIOT ) just to name a ￰21￱ LFGY actually holding common shares of these stocks, I suggest that investors limit their expectations around the ETF's ability to provide a meaningful level of capital appreciation over ￰22￱ is best utilized for income generation above anything ￰23￱ It makes sense for LFGY to focus on these crypto-related companies because the strategy needs volatility to generate ￰24￱ higher the implied volatility of a holding, the higher the option premiums that can be ￰25￱ I consider these riskier positions from a growth standpoint, investors are being rewarded with high levels of income for this ￰26￱ I am bullish on Bitcoin ( BTC-USD ), I am not as bullish on these speculative companies that utilize ￰27￱ limit this downside risk, LFGY sells collars and put ￰28￱ basically means that the fund now pairs the traditional call writing with also buying puts or structured put spreads to act as insurance against the underlying ￰29￱ helps protect against price drops below a certain strike ￰30￱ it can soften the impact of declines, it will not stop them ￰31￱ tradeoff of option writing is that upside movement is sacrificed to the selected strike ￰32￱ LFGY also includes some downside protection with the collars and put spreads, the overall net yield is slightly reduced in ￰33￱ & Risks Despite LFGY holding shares of the stocks it is writing options against, investors should not expect the performance to track its underlying ￰34￱ as an example, I pulled in the performance of LFGY, including all distributions, against the performance of its top ￰35￱ we can see below, LFGY underperforms nearly all of the listed positions, with the exception of MSTR.

Therefore, investors need to understand that a high yield doesn't automatically translate to a high ￰36￱ you are bullish on any of the underlying positions, you would be better off buying those individual positions instead of ￰37￱ by YCharts Therefore, LFGY presents the risk of underperformance over a longer time ￰38￱ large distributions are likely to be offset by the share price deteriorating over ￰39￱ the use of options limits the level of capital appreciation that can be experienced, LFGY will have trouble recovering its share price over ￰40￱ if markets experience a strong rally, YieldMax funds aren't typically known for their ability to participate in these ￰41￱ if they do, the capital appreciation is typically ￰42￱ to provide some further insights into its performance, I believe that a comparison against ULTY and YMAX would be ￰43￱ operates a similar strategy but with a different set of ￰44￱ operates as a 'fund of funds' but is still one of the most diversified choices amongst the YieldMax funds.

However, I believe that it would only be fair to measure the performance of these funds starting in April 2025, which is when ULTY implemented its strategy ￰45￱ at the performance comparison below, we can see that LFGY has outperformed both ULTY and YMAX since ￰46￱ by YCharts Since LFGY is focused on crypto businesses, the fund is likely to share some of the sensitivity to shifts in the price of ￰47￱ the fund's operating history is so limited, we haven't been able to experience how closely linked LFGY is to Bitcoin. However, I remain cautious about a significant pullback in the price of Bitcoin and how it will negatively impact LFGY's share price and the ability to sustain its current payouts.

I believe that the correlation may not be as clear right now because Bitcoin has continued to hover near its ￰48￱ by YCharts Distribution Utility According to the latest declared weekly distribution of $0.512 per share, the estimated annual yield sits above 72% at this ￰49￱ of the biggest issues I've had with many of the YieldMax funds is that their payouts tend to trend downward over time, especially after their share price has experienced some mild deterioration. However, LFGY differentiates itself by providing shareholders with a very steady range of payouts since the fund's ￰50￱ fund launched shortly before the market's rapid decline back in March, which is why we can see payouts slightly declining at the start of the graph ￰51￱ Alpha Admittedly, this payout stability can change at any moment, so I would still advise ￰52￱ payouts can shift based on the fund's underlying success with its option strategy or just based on the overall momentum of the market or its holdings.

I believe that either a sharp or prolonged period of decline in market indices will result in LFGY's payouts being reduced over ￰53￱ the fund's net assets decrease, so will the ￰54￱ is a trend that has been observed throughout many different YieldMax ￰55￱ LFGY holds common shares of the underlying equities that it writes options against, I still believe that the payouts can ￰56￱ these risks, investors like myself will always be interested in a fund that offers a distribution rate as high as ￰57￱ theory, this large yield provides investors with the possibility of reaching house money status, which is the point where your initially invested capital has been fully repaid through distributions ￰58￱ to demonstrate this concept, we can use some basic napkin ￰59￱ that we have $10,000 invested at a 72.5% distribution rate. $10,000 x 72.5% = an estimated annual income of ~$7,250.

Therefore, investors will be able to eventually collect their initial capital back in a little over a ￰60￱ unfortunate part is that it requires a longer holding period to reach this ￰61￱ many of the underlying holdings are extremely volatile and have some sort of indirect exposure to the crypto markets, there's always a chance that LFGY is impacted by a pullback in these riskier ￰62￱ a more positive note, LFGY typically pays out these large distributions using return of ￰63￱ of capital distributions aren't considered income and, therefore, aren't taxed as such. Instead, a return of capital distribution lowers an investor's cost basis, and this allows taxes to be deferred until the time of ￰64￱ it is possible to hold a position in LFGY long enough for your cost basis to reach $0 per ￰65￱ this point, all of the income received going forward would be classified as long-term capital gains, which are considered to be qualified dividend income and are more ￰66￱ Distribution Email However, it's worth noting that the distributions aren't always paid out using return of ￰67￱ instance, this week's payout contained no return of capital, which means that investors will see tax consequences from all of the income received here.

Therefore, it's important to meticulously track the weekly distributions and how they are being funded, so that you can properly estimate the tax bill at the end of the year. I would highly suggest going to the YieldMax site and using their contact form to request being added to the distribution ￰68￱ In conclusion, I rate LFGY as a buy at this time due to the high-income potential and the fund's ability to keep payouts consistent since its inception. I like the fact that LFGY actually holds common shares of the equities that it writes options ￰69￱ helps reduce the risks related to synthetic options, which many other YieldMax funds utilize. Additionally, LFGY implements strategy collars and put spreads to minimize the downside ￰70￱ this, investors should still consider the risks of LFGY's crypto-related portfolio of ￰71￱ Bitcoin remains near its all-time highs, the fund's payouts and performance have been great.

However, this consistency may change if the Bitcoin cycle shifts and there's a large pullback.