Market continues to crash

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Mechafanboy

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redname said:
y TSLA keep gng up?
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Tsla is not tied to fundamentals. If the market is as forward looking as it claims, the stock should have collapsed liao since Congress wants to stop all renewable plus EV credits from next year onwards. Without gahmen support, Tesla will become unprofitable.
 
dereth

dereth

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crimsontactics said:
Why why why Bro dereth? :(

$5M SGD or USD? :(
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$5M SGD only Bro Crimsontactics... :confused:

Please don't ask me... I have no answer... I can only say life is sometimes up, sometimes down....

497856312_725572430002124_7239748842125617586_n.jpg
 
focus1974

focus1974

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cyke69sg said:
Is passive strategy. No need buy and sell. Is buy and buy and buy. Collect and collect and collect every month distributions. Buy back buy back buy back. Grow grow grow.

Eventually is hit $100+k a month in monthly distrobutions. Million plus a year. And keep growing.
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The YieldMax ETF Dilemma: Unpacking the Allure of High Yields and the Reality of NAV Erosion​

Investors drawn to the exceptionally high monthly payouts of YieldMax ETFs like YTSL often celebrate the strategy of reinvesting distributions to seemingly compound their income. However, a crucial piece of the puzzle is often overlooked: the simultaneous and corresponding decline in the ETF's Net Asset Value (NAV). This creates a dynamic that can be misleading if not fully understood, giving the illusion of ever-growing dividends while the underlying investment value may be shrinking.

At the heart of this issue lies the mechanism by which YieldMax ETFs, and specifically the Tesla Option Income Strategy ETF (YTSL), generate their impressive yields. Unlike traditional dividends, which are paid from a company's profits, YTSL's distributions are primarily derived from selling covered call options on the underlying Tesla (TSLA) stock it holds.

Here's a breakdown of the process and its implications:

1. How YTSL Generates Income: YTSL employs a "covered call" strategy. It owns shares of Tesla and, on a monthly basis, sells call options on those shares. The premium received from selling these options is the primary source of the income distributed to the ETF's shareholders. This strategy is particularly effective in generating high income in volatile markets.

2. The Nature of the Distribution: The monthly payments from YTSL are not qualified dividends in the traditional sense. They are a combination of the option premiums collected and, at times, can include a "return of capital." A return of capital is essentially the fund returning a portion of the investor's original investment.

3. The Inescapable Link Between Distribution and NAV: This is the critical point that many investors miss. When an ETF pays out a distribution, its NAV will decrease by the same amount on the ex-dividend date. This is a fundamental principle of how investment funds operate. The distribution is not "free money"; it is a transfer of value from the fund's assets to the shareholder.

To illustrate, imagine an ETF with a NAV of $20 per share. If it declares a $1 distribution, on the ex-dividend date, the NAV will, all else being equal, drop to $19. The investor now has $1 in cash and a share worth $19.

4. The "Growing Dividend" Illusion: When an investor takes that $1 distribution and reinvests it back into the ETF, they are essentially buying more shares at the new, lower NAV. While this does increase the number of shares they own, leading to a larger total distribution in the following month (assuming the distribution per share remains constant), it masks the fact that the value of their initial investment has not grown by the same magnitude. The "growth" in income comes at the cost of a diluted ownership stake in a fund with a depreciating asset base.

5. The Impact of the Underlying Asset: The situation is further compounded by the performance of the underlying stock, in this case, Tesla. The covered call strategy caps the upside potential of the stock. If Tesla's stock price soars, the fund will not participate fully in those gains because the shares may be "called away" at the strike price of the options it sold. Conversely, if Tesla's stock price plummets, the fund bears the full brunt of that loss, which is only partially offset by the premiums received from selling the call options. This can lead to a significant erosion of the NAV over time, a phenomenon that has been observed in the historical performance of such high-yield covered call ETFs.

In essence, the argument that one can simply reinvest the monthly income from YTSL for ever-growing dividends without acknowledging the corresponding NAV decay is a one-sided view. It focuses solely on the cash flow generation while ignoring the total return of the investment, which is a combination of both the distributions received and the change in the NAV. For a sustainable and realistic investment strategy, investors must consider both sides of this equation.
 
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cyke69sg

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Mechafanboy said:
Tsla is not tied to fundamentals. If the market is as forward looking as it claims, the stock should have collapsed liao since Congress wants to stop all renewable plus EV credits from next year onwards. Without gahmen support, Tesla will become unprofitable.
Click to expand...
But Tesla has other business .

Robotics.

AI.

FSD Transportation and logistics.
 
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