NVDY ETF: Weekly Payouts Likely To Decrease – A Cautionary Tale for High-Yield Chasers

The YieldMax NVDA Option Income Strategy ETF (NVDY) has long captivated income-hungry investors with its audacious 44.9% trailing 12-month dividend yield. But as the calendar flips to 2026, the ETF's high-risk, high-reward covered call strategy on NVIDIA (NVDA) is showing cracks. With distributions fluctuating wildly-from $1.6276 in May 2025 to a mere $0.1649 in December 2025-investors must ask: Is this a sustainable income machine, or a ticking time bomb?

The Allure and the Achilles' Heel

NVDY's strategy is simple in theory: sell weekly call options on NVDA to generate premiums while retaining partial exposure to the stock's upside. In Q3 2025, this approach delivered a 42.67% return, outpacing the S&P 500 but lagging behind NVDA's meteoric rise. Yet the ETF's synthetic structure-relying on derivatives rather than direct stock ownership-has created a paradox. While NVDA's Q3 2026 revenue hit a record $57 billion, NVDY's net asset value (NAV) appreciated only 25.28% year-to-date as of September 30, 2025. This "NAV erosion" has quietly eroded investor returns.

The Volatility Trap

The covered call strategy's fatal flaw? It caps gains when NVDA surges and exposes investors to full losses when the stock drops. As one analyst put it, "NVDY is a flawed strategy on an unstoppable stock." Recent data underscores this risk: in Q1 2026, NVDY's 30-Day SEC Yield plummeted to 2.58%, while distributions increasingly rely on return of capital. For instance, the December 3, 2025, payout included 16.58% return of capital, signaling a shrinking income component.

Market volatility has only exacerbated the problem. With NVDA's beta at 1.60, the ETF is hyper-sensitive to swings in the tech giant's stock. In February and March 2025, NVDY stumbled as broader markets faltered, underperforming both the S&P 500 and SPY ETF. Now, as AI-driven demand for NVDA's chips faces potential export restrictions, the ETF's future payouts hang in the balance.

Expert Warnings and the Road Ahead

Seeking Alpha analysts have sounded the alarm: "Weekly payouts are likely to decrease," they argue, as the fund's dividend yield has already contracted to 79.25%. This isn't just a numbers game-it's a structural issue. NVDY's reliance on a single stock and its synthetic options strategy make it a high-yield trap, where distributions are more likely to vanish than grow.

For investors, the takeaway is clear. NVDY's eye-popping yields come with a side of volatility and a lack of downside protection. While NVDA's dominance in the AI era is undeniable, the ETF's design ensures that investors will always be playing catch-up. As one Reddit user aptly noted, "You're not investing in NVDA-you're investing in a derivative of NVDA."

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Final Verdict

NVDY's weekly payouts are a house of cards. The ETF's strategy may deliver fireworks in calm markets, but it's a recipe for disaster in a downturn. For those chasing income, the risks far outweigh the rewards. As the Fed's dovish stance fades and global tech dynamics shift, NVDY's payouts are poised to follow the same volatile trajectory as its underlying options.