Leveraged Coinbase ETFs (COIW) vs. Covered Call Strategies (CONY): A Risk-Adjusted Returns Analysis

The cryptocurrency market's volatility has spurred demand for innovative ETF strategies, with two prominent options-Roundhill's COIN WeeklyPay™ ETF (COIW) and YieldMax's COIN Option Income Strategy ETF (CONY)-offering distinct approaches to capturing crypto-linked returns. While both products track the Coinbase Index, their structural differences-leveraged exposure versus covered call strategies-create divergent risk-return profiles. This analysis evaluates their performance through the lens of risk-adjusted returns and volatility capture, drawing on recent data to guide investors.

Volatility and Drawdowns: A Tale of Two Strategies

COIW, a 2x leveraged ETF, amplifies the daily movements of the Coinbase Index, resulting in a daily standard deviation of 94.33%-nearly 43% higher than CONY's 65.79% according to a PortfoliosLab comparison. This volatility is inherent to its design, as leveraged ETFs compound gains and losses over time. In contrast, CONY employs a covered call strategy, selling options to generate income while capping upside potential, which inherently smooths returns.

Maximum historical drawdowns further illustrate this divergence: COIW's peak-to-trough loss of -48.87% dwarfs CONY's -50.34%, as shown in the PortfoliosLab comparison. However, current drawdowns as of October 10, 2025, reveal a more nuanced picture: COIW is down -20.77% from its recent high, while CONY's decline is -16.37% (PortfoliosLab comparison). This suggests that while CONY's strategy mitigates long-term downside risk, it may not fully insulate investors during sharp market corrections.

Returns and Risk-Adjusted Performance

Over six months, COIW's 113.99% return outperformed CONY's 50.90% (PortfoliosLab comparison), a gap that reflects the power of leverage in rising markets. Yet, leveraged ETFs are structurally disadvantaged in volatile or sideways environments due to decay from daily rebalancing. CONY's lower return comes with a Sharpe Ratio Rank of 45 (PortfoliosLab comparison), a metric that balances returns against volatility. COIW's Sharpe ratio remains unavailable due to insufficient data, a limitation for assessing its risk-adjusted efficiency as noted in the PortfoliosLab COIW analysis.

The expense ratios of both ETFs (0.99%) are identical, making cost a neutral factor (PortfoliosLab comparison). However, their near-perfect correlation (0.99) means they offer minimal diversification benefits (PortfoliosLab comparison). Investors seeking to hedge against crypto's volatility may find little advantage in pairing these products.

Strategic Implications for Investors

COIW is best suited for aggressive investors with a short-term horizon who prioritize capital appreciation over stability. Its performance hinges on sustained bullish momentum in the Coinbase Index, but its high volatility and decay risks make it unsuitable for long-term holdings. CONY, meanwhile, appeals to income-focused investors willing to sacrifice upside potential for reduced drawdowns. Its covered call structure provides a buffer during downturns, though it may lag in strong bull markets.

The absence of a Sharpe ratio for COIW underscores the challenges of evaluating leveraged products. As noted by PortfoliosLab, such metrics require at least 12 months of data to calculate. With COIW having launched in April 2025, its risk-adjusted performance remains an open question.

Conclusion

The COIW-CONY debate encapsulates a classic trade-off: explosive returns for elevated risk versus tempered gains for stability. While COIW's 2x leverage has driven exceptional six-month returns, its volatility and structural decay risks demand cautious deployment. CONY's covered call approach offers a smoother ride but at the cost of capping upside. Investors must weigh their risk tolerance and time horizon against these dynamics, recognizing that neither strategy is a panacea for crypto's inherent turbulence.