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Recently, we’ve seen the emergence of numerous ETFs utilizing various options strategies to boost income. For instance, some employ covered call strategies, allowing investors to earn yields of 10% or more from relatively modest stock portfolios.
The AldeMax ETF takes this concept further by implementing a proactive approach aimed at maximizing yields. It’s not unusual for AldeMax ETFs to boast dividend yields that can reach 30%, 40%, or even higher.
An extreme example is the AldeMax Tesla Option Income Strategy ETF, which utilizes a call options strategy on Tesla stocks to generate substantial monthly income. Remarkably, over the past year, this ETF has shown a dividend yield of around 127%.
But, as the saying goes, if something seems too good to be true, it often is. You might wonder if such an ETF, promising triple-digit yields and likely to do so again soon, is a good idea. There are important factors to consider before diving into this investment.
The AldeMax Tesla Option Income Strategy ETF largely holds U.S. Treasuries which it uses as collateral for buying and selling options close to typical stock prices. For example, the portfolio’s largest non-financial position is a call option set for July 2025 with a strike price of $340. It’s a mix of long and short positions, meaning some options are sold, along with some puts.
The main objective here seems to be maximizing income relative to risk.
However, two significant risk factors loom. First, there’s the inconsistency in monthly dividend payments. Over the past year, this ETF’s distributions have varied quite a bit, falling as low as $1.29 or even $0.40.
The bigger concern is the overall trend in stock prices which has shown a downward bias over time. In layman’s terms, if Tesla’s stock rises, this ETF’s options strategy might limit potential gains. Conversely, a drop in stock prices could lead to significant losses. In fact, although Tesla’s stock rose 92% since the AldeMax ETF’s inception in late 2022, this ETF has experienced a steep decline of 78%, including a reverse split along the way.
Even with slight stock price drops, these ETFs might still be profitable. So, for instance, if the ETF drops by 30% but yields 100% or more, it could still be worthwhile. Yet, that’s not quite the situation here. Since its launch in 2022, the ETF has generated just 26% of total returns, which is 52% worse than simply holding onto Tesla stocks.
To sum it up, the AldeMax ETF generates more revenue than directly purchasing the underlying stock during times of flat performance without significant price changes. However, take a look at Tesla’s historical price movements—it’s clear they’re not as predictable as one might wish.
The takeaway? If you believe Tesla shares will remain within a narrow price range for a while, the AldeMax Tesla Option Income Strategy ETF might be a strategic play. Just keep in mind that these ETFs aren’t guaranteed income machines and may not produce favorable overall returns in the long run.
Before investing, it’s wise to consider your options carefully, especially regarding the AldeMax TSLA Options Income Strategy ETF.
