Back in October, Finbold put a spotlight on a certain Nvidia ETF. This specific exchange-traded fund, the YieldMax NVDA Option Income Strategy ETF (NYSEARCA: NVDY), uses a covered call strategy combined with short-term treasury investments.
So, why would anyone consider NVDY, an ETF that utilizes stock options, over holding Nvidia stock (NASDAQ: NVDA) directly? The answer is quite simple — for all of its growth prospects, NVDA offers very little in the way of passive income. The leading chipmaker will pay out its next dividend on April 2 — and investors will receive $0.01, a single cent, per Nvidia share they hold.
Since Nvidia pays out dividends on a quarterly basis, that’s $0.04 per year. In contrast, over the course of 2024, NVDY paid out $18.51 per share.
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However, with the market-wide turbulence we’ve been experiencing in early March, both NVDA and NVDY have seen prices drop significantly. In addition, it seems like NVDY fared much worse.
This Nvidia ETF has outperformed the stock thus far — will that still be the case?
Since the start of the year, the price of Nvidia stock has dropped by 18.48%. Despite a string of impressive earnings calls, the emergence of Chinese artificial intelligence (AI) model DeepSeek has shaken investor confidence, although Wall Street remains largely bullish. In addition, ongoing trade tensions have led to a risk asset selloff — and high-growth tech companies were hit quite hard.
On a year-to-date (YTD) basis, the Nvidia ETF has suffered an even greater loss, which currently stands at 30.71%. While a comparison between the two might seem like an open and shut case, there are a few additional factors to consider.
With Nvidia stock, the calculation is simple — an 18.48% loss. For the Nvidia ETF, we have to consider the distributions.
Since the start of the year, NVDY has made 3 payouts — on January 6, January 31, and February 28. Those payouts were worth $0.8983, $0.8294, and $1.6118, respectively. Put together, that’s roughly $3.34.
In the period that we’re discussing, the price of the Nvidia ETF dropped from $23.35 to $16.18 — a 30.71% loss. However, with the $3.34 in payments factored in, the loss is actually closer to 16.40%.
Lastly, readers should note that both NVDA shares and NVDY will exhibit similar price action. The choice mostly boils down to preference, with the regular stream of dividend payments being the deciding factor. Finally, it’s important to remember that this was a simplified, hypothetical example — as expense ratios and taxes on dividends also play a role in determining total returns.
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