Summary Yieldmax MSTR Option Income Strategy ETF is regaining appeal after a period of NAV erosion and price volatility. MSTY's investment thesis centers on generating high income, not capturing upside, with NAV stability being crucial for long-term holders. Recent trading suggests MSTY may enter another phase of NAV retention and compelling distributions, making it attractive for income-focused investors. If MSTY sustains low NAV erosion, it could become a solid swing trade or longer-term holding, especially at current lower price points. In early September 2025 I exited my position in Yieldmax MSTR Option Income Strategy ETF ( MSTY ) because I didn't like the widening spread between the price of the ETF and the underlying Strategy ( MSTR ). It wasn't only the widening spread over several months but also the fact it was the result of real NAV erosion, not what is called NAV erosion but really isn't (we'll get into that later in the article). My thought was price discovery, and the declining distribution percentage had yet to become clear as to where it was going to level of, or if it was going to level off. In this article we'll look at why MSTY is looking interesting again, and what I'm now looking for to decide whether or not to open another position in the popular ETF. First things first There is no doubt in my mind that an income investor has to believe in the underlying MSTR if they're considering taking a position in MSTY. The major reason is there is so much chatter and hype surrounding the ETF that it would be easy to be influenced to buy or sell if you're not convinced of the potential of MSTR as the underlying. In the case of Strategy, it's now a proxy of Bitcoin ( BTC-USD ), so how one views Bitcoin should determine how one views MSTR, and by extension, MSTY. The other thing to consider is when investing in a covered call ETF like MSTY, you're not attempting to capture the upside, but are taking a position to generate income. This is obvious, but I'm still surprised at how many people, including some investing writers, focus on weak growth, when the very nature of a CC ETF has that inherently built into it. That's especially true with MSTY because of the high distribution it continues to pay out. NAV concerns Any coverage of a covered call ETF will almost always include a reference to NAV erosion. That said, many investors really don't know what NAV erosion is or mix it up with elements that aren't related to NAV erosion. One major example of that is when the share price of the underlying drops in price and MSTY falls in conjunction with it. This is interpreted as NAV erosion by some, but in fact is nothing more than a drop in price based upon factors associated, in this case, with MSTR. A drop in price doesn't necessarily mean erosion. If there is NAV erosion, it would be reflected in the ongoing decline of MSTY NAV as measured against the NAV of MSTR and the book NAV of MSTY. Another metric to watch for in regard to actual NAV erosion is if MSTY were to continue to pay out more distributions on a consistent basis than it is earning over the long haul. Viewing a chart, this is reflected in stairsteps going down on each ExDiv date with very little or no NAV recovery after each payout announcement. Also, when charting the two together, MSTR has shown some stability or increase in price, while MSTY has shown price declines. This is the trigger that pushed me to sell in September. Charting MSTY and MSTR (Seeking Alpha) What's interesting a month later After selling off my position in MSTY, on 9/25/2025 it hit a 52-week low of $12.825 and has quickly jumped by over $2.00 per share as of 10/6/2025, trading in the high $14s per share. MSTY (Seeking Alpha) The increase in share price isn't what interests me; after all, this is an income-producing ETF, it isn't built for sustainable growth, and that's not what attracts me to it. Rather, what interests me now is the trading pattern the company has had since it dropped to about $19.24 on February 25, 2025, and maintained that price support all the way through August 13, 2025, before beginning another significant drop in price, ending at the abovementioned 52-week low. What we have here is a prolonged period of NAV retention at the same time the company was throwing off huge distribution numbers. Now that there is another drop in share price for MSTY and the following rebound, it is acting like it did after the drop in price in February. In other words, the ETF has the probability of entering into another fairly long period of retaining its price and NAV while continuing to pay out solid distributions. Those distributions aren't likely to be near what they were in the past, but they're still very high and compelling for those looking for income. The other, and potentially most important thing I'm looking for is the possibility that we may be approaching a price point that goes beyond just swing trading it but potentially extending out much further in timeframe than it has since its inception. If that does occur, it would suggest a drop in distributions while retaining most, if not all, of its NAV. I think it's even possible that it could grow NAV once MSTR is once again when sentiment for the company improves. That said, ULTY has managed to stop NAV erosion while maintaining a high distribution. If MSTY can come close to duplicating that, it'll be an extraordinary generator of income for a long time, while mitigating NAV erosion. If it enters into another prolonged period of little or no NAV erosion, we could start to see how it could trade over the long term. ULTY chart (Seeking Alpha) Since early April, ULTY hasn't had any meaningful NAV erosion. Conclusion MSTY has yet to prove it is entering into another long period of sustained NAV while continuing to pay out a compelling distribution. If it's in the early stages of that, like I think it may be, it could be a solid swing trade, and at the lower price point, it is less risky than when it was trading much higher. Not only that, but I think as the ETF matures, it is likely to enter into a more predictable trading pattern that includes lower and slower NAV erosion, and quite possibly, little to no NAV erosion. Even so, when checking MSTY at the YieldMax website, I haven't seen anything to point to the fund managers doing anything to change how they run the fund. It could be that management is waiting to see if there is a point where the ETF finds a bottom and little NAV erosion, without having to change their way of running the fund. If the ETF is entering into another months-long period of low NAV, and afterwards it once again starts a downward spiral, I think management will have to look at ways of shoring that up. That could be done with puts like ULTY management does or possibly take a small percentage in the underlying in order to capture some of the upside. Either way, at this time, if MSTY performs as it did earlier in the year, I'm probably going to open another position because there's less risk. Lowering the distribution will help to support some of the NAV erosion, and if it is lowered, it's still paying out a very high return.
