What this ETF is trying to do

The YIELDMAX(R) NFLX OPTION INCOME STRATEGY ETF (ticker: NFLY) is an option income ETF. This means it uses specific investment strategies involving options to try and generate regular cash for investors.

What the numbers show

The data shows a significant difference between how the share price has moved and the total return.

• Price Return: This measures only the change in the ETF's share price. The one-year price return was approximately -58.28%. The year-to-date (YTD) price return was approximately -43.80%. Looking further back, the three-year price return was approximately -58.80%.

• Total Return: This includes both price changes and the value of distributions. The one-year total return was approximately -37.05%. The YTD total return was approximately -23.09%. Interestingly, the three-year total return was approximately 56.01%.

To put the price change in perspective, the estimated price from roughly one year ago was $16.18, while the current price is $6.75.

Income and distribution explanation

NFLY is designed to provide frequent cash payments. The distribution yield is approximately 65.56%. This is a very high percentage, but it is important to remember that a high yield does not guarantee an investor earned that amount as a total return.

The ETF has a "frequent" or weekly-like distribution frequency, with 51 distributions made over the last 12 months. Most of these payments (48 out of 51) occurred on Thursdays.

NAV erosion explanation

The ETF has a severe erosion-risk flag. This means that StockValueFinder's screening rules detected substantial price deterioration and a weak erosion score. The fund has an erosion score of 10, which is labeled as "Severe price erosion."

It is important to distinguish between price erosion and NAV erosion. The supplied data is sufficient to evaluate price erosion, but it does not include enough historical NAV-per-share data to confirm or rule out NAV erosion. While the market price of the shares has fallen significantly, we cannot use this alone to prove that the Net Asset Value (NAV) itself declined.

Pros

• High Distribution Yield: The ETF offers a very high distribution yield of approximately 65.56%.

• Frequent Payouts: Investors receive cash very often, with a weekly-like frequency.

Cons

• Severe Price Erosion: The ETF shows signs of severe price erosion, with the share price dropping significantly over the last year.

• High Risk Indicators: The fund carries a severe erosion-risk flag and an income rating grade of "F."

• Price vs. Total Return Gap: The share price has declined much faster than the total return, meaning distributions are being used alongside a falling share price.

Beginner takeaway

NFLY is an ETF that focuses on providing high, frequent cash distributions through an option income strategy. However, new investors should be aware that this high yield has been accompanied by a significant decline in the share price. The presence of a severe erosion-risk flag suggests that the price has dropped substantially over time. Always remember that high distribution yields can be misleading if the underlying share price is losing value.