Let’s start with the uncomfortable truth: I own some shares of the YieldMax MSTR Option Income Strategy ETF.(NYSEMKT:MSTY) I’m starting to regret my IRA.
I have owned Bitcoin(Cryptocurrency: BTC) Focusing on strategy from 2014(NASDAQ:MSTR) The MSTY ETF is just another way to buy Strategy stocks, but with different risks and benefits that I don’t really need. I should have known better, but that’s it. I’m just an imperfect human being too. My moment of clarity may save you from making the same mistake.
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When Bitcoin leverage isn’t interesting enough
If Bitcoin is volatile, the strategy is Bitcoin on steroids. The company is borrowing billions of dollars and selling even more stock just to buy more Bitcoin. This all-in strategy adds corporate, leverage, and governance risks on top of the inherent volatility of cryptocurrencies. You are no longer just betting on Bitcoin. It’s betting on Chairman Michael Saylor’s Bitcoin maximalist strategy and the company’s ability to manage its massive debt.
MSTY wraps this risky asset in a covered call strategy, generating monthly payments at the expense of a rapid decline in MSTY stock price. Yes, you can earn monthly income from option premiums, but this limits the amount of upside you can make in your price base. It’s like buying a sports car but agreeing to never drive it faster than 55 miles per hour.
The IRA angle just about makes sense.
Holding MSTY in an IRA avoids one major drawback of its basic structure.
In a taxable stock brokerage account, these monthly distributions do not count as dividends because they result from stock option trades. They are taxed as ordinary income and can result in federal and state taxes totaling 37%. My traditional IRA is compounded tax-deferred.
Additionally, most retirement accounts cannot hold physical Bitcoin, so MSTY provides crypto-adjacent exposure that is impossible to own directly. There have always been spot Bitcoin exchange traded funds like the iShares Bitcoin Trust ETF.(NASDAQ:IBIT)But it’s still not quite the same as buying Bitcoin.
My exit strategy from Strategy
But still, I have doubts about MSTY’s position. With DRIP enabled, historical total returns are on par with MSTR, so why are you accepting the capped upside from covered calls? If you’re bullish enough on Bitcoin that you want IRA exposure, shouldn’t you own MSTR directly or own a spot-priced Bitcoin ETF?
Therefore, you may readjust your crypto holdings. MSTY’s position makes no sense to me and I don’t want the adrenaline rush of Strategy stock. That cash will likely be moved into ETFs or remain on the sidelines for some time. Maybe I already have enough Bitcoin-related exposure even without the tricky MSTY fund.
It was an interesting experiment, but that’s it.
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Anders Bylund has positions in Bitcoin, Tidal Trust II-YieldMaxTM Mstr Option Income Strategy ETF, and iShares Bitcoin Trust. The Motley Fool has positions in and recommends Bitcoin and iShares Bitcoin Trust. The Motley Fool has a disclosure policy.
