The YieldMax NVDA Option Income Strategy (NVDY) ETF stock will be in the spotlight this week as Nvidia publishes its financial results. NVDY stock was trading at $16.90, a few points below the year-to-date high of $17.2. 

NVIDIA to publish earnings on Wednesday

The main catalyst for the Nvidia and NVDY ETF is that the company will publish its second-quarter results on Wednesday. 

Wall Street analysts have high expectations from Nvidia this week as most of it customers published strong results and boosted their capital expenditure plans. UBS recently hiked its stock outlook from $175 to $205.

Microsoft, its biggest customer, has hinted that it will spend over $30 billion in capital expenditure in the current quarter. Other hyperscalers like Google, Amazon, and Meta Platforms have also done the same.

At the same time, Taiwan Semiconductor, its largest supplier, also published strong results, citing demand for AI.

NVIDIA’s results will provide more information on its Chinese business, which Trump blocked a few months ago. 

While he has lifted the ban, NVIDIA has not received a warm welcome from China and has even paused the sale. Trump is also considering allowing the sale of more advanced NVIDIA chips to the country, which may boost its stock. 

NVDY ETF inflows are rising 

Meanwhile, income-focused investors are flocking into NVDY. Data shows that the fund now has over $1.8 billion in assets under management. Its net inflow this year stood at over $906 million. 

It added $26 million in net assets last week after adding another $53 million a week earlier. This growth is happening as investors seek an exposure to NVIDIA while still generating regular monthly income. 

Data on its website shows that NVDY has an 81% dividend yield, much higher than NVIDIA’s yield of 0.022%.

NVDY generates its high dividend payment by using the covered call strategy. This is an approach where the fund manager buys a stock and then writes call options on the same. 

A call option is a trade that gives the buyer the right, but not the obligation, to buy an asset at a certain price. The trade gives the fund a premium, which it distributes to its investors as a monthly dividend.  

The main risk with NVDY and other covered call ETFs is that they must have a strike price. A trade is normally closed when this strike price is hit, meaning that it does not participate in the rest of the rally. 

Is NVDY ETF a good buy?

In theory, NVDY ETF gives a user a chance to take part in the NVIDIA stock rally while giving them access to monthly dividends.

However, history shows that the total returns of most covered call ETFs are smaller than the main asset. For example, the NVDY stock has dropped by 27% this year as the NVIDIA stock jumped by 33%. 

NVDA has also done better in terms of the total return. Its total return this year stood at 33%, higher than NVDY’s 20%. The same trend happened in the last 12 months as the chart below shows.

NVDY vs NVIDIA stocks

Therefore, most investors will likely do well by just foregoing NVDY’s monthly dividend and focusing on NVDA’s stock performance. 

Read more: Nvidia’s Jensen Huang calls TSMC stock buyers ‘very smart’ as US mulls chip equity stakes

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