Summary YieldMax MSTR Option Income Strategy ETF (MSTY) closely tracks MSTR, serving as a high-yield covered call ETF proxying Bitcoin exposure. MSTY's recent share price decline is attributed to MSTR and Bitcoin corrections, not structural NAV erosion, suggesting strong rebound potential with underlying recovery. Covered call upside caps refer to option premium limitations, not direct share price ceilings; MSTY's income and price will rise if MSTR and Bitcoin rebound. MSTY should be a small, tactical income portfolio allocation due to volatility, with risk from prolonged Bitcoin/MSTR corrections and potential distribution declines. YieldMax MSTR Option Income Strategy ETF ( MSTY ) is the largest, as measured by assets under management, of the ultra high-yield covered call ETFs available. It's also among the most well known and popular of them. In the early months of the inception of the ETF, it had an enormous amount of positive sentiment attached to it, primarily because it was new and a novelty, and the distributions paid out were extraordinary be historical standards, and paid out very well and consistently, well over $1.00 per unit or share. It has as an underlying Strategy Inc. ( MSTR ), which had also been viewed very favorably by the market, until it wasn't. All of that was associated with the growth trajectory of Bitcoin, which soared to an all-time high before pulling back to where it is today, trading under $86,000 as I write. Since MSTR is considered a proxy for Bitcoin, it of course corrected with it, and by extension, so did MSTY, as the chart below confirms. In this article I want to take a look at why I believe MSTY's current performance is more than likely a temporary weakness, and when Bitcoin and MSTR rebound, it will do so also, even with some of the upside limitations of a covered call strategy. Seeking Alpha First, by the charts The chart above shows Bitcoin, MSTR, and MSTY and how they performed over the last year in general, as well as in relationship to one another. Of major importance is MSTY is trading almost in direct correlation to MSTR and Bitcoin. One exception is Bitcoin, from early August 2025 through its high in early October 2025, was able to maintain more of a sideways trajectory during that time, while MSTY and MSTR were slightly down in comparison. But once the top came in, all three of them have dropped pretty much in unison with one another, with MSTY holding its own. It's also significant that the stairsteps down on the chart that MSTY had, was also mirrored by Bitcoin and MSTR, meaning it was moving up and down primarily based upon the underlying. As a matter of fact, MSTY started moderating more after the top, as compared to Bitcoin and MSTR. What that means is MSTY isn't doing near as bad as many may think because it was moving on the basis of the performance of MSTR. NAV erosion and share price movement An ongoing misunderstanding of how MSTY works in relationship to NAV erosion is in regard to the share price movement related to MSTR. The key is in defining what NAV erosion actually is. First, what it isn't is the up and down movement of its share price in correlation to the price movement of MSTR. That has little or nothing to do with NAV erosion. I mention this because to this day many investors and financial writers still don't know the difference. If the share price of MSTY or any other covered call ETF falls, the assumption is the only thing causing that is NAV erosion, rather than the strong probability it's nothing more than the performance of the underlying. What NAV erosion is is when the revenue from option premiums doesn't reach the level of the distribution being paid out. The result can be that the share price of MSTY drops, but it's from real NAV erosion and not the performance of MSTR. Why is that important to understand? If the drop in share price in MSTY is coming primarily from NAV erosion and not the performance of the underlying, than it'll struggle to bounce back once Bitcoin and MSTR bounce back. If it's nothing more than MSTR's performance, than once it reverses course so will MSTY. On the other hand, if it's primarily NAV erosion, it'll struggle to get the bounce it would get from its direct correlation with MSTR. This is the heart of my thesis why I believe MSTY isn't doing nearly as bad as it appears to be because of its decline in share price, which I knew was inevitable once Bitcoin reached a new high. On the other hand, I believe it's just as inevitable that it'll enjoy the bounce of MSTR once it comes. Capping the upside Another misunderstanding associated with covered call ETFs like MSTY is when thinking in terms of the upside being capped. I've observed a number of investors think that is has something to do with the share price of MSTY, when in reality it's a reference to the limitations that a covered call premium will generate. I know most readers know this, but I've seen some investors think the cap is directly related to the share price of MSTY, rather than the capped upside of the covered call option. After all, the stock market is where we place bids on MSTY, and what any one investor thinks it is worth is what the bid will be. It has nothing to do with the cap associated with covered calls. That doesn't mean investors won't be influenced by the limitations in relationship to what they bid, but it's a decision an investor makes that has nothing to do with the cap. MSTR and Bitcoin I want to briefly point out that MSTR and not Bitcoin is the underlying of MSTY. While MSTR is considered a Bitcoin proxy, it's still not the same. That's why in the charts above Bitcoin traded sideways for a time while MSTR and MSTY were declining in share price. Even so, over time, how Bitcoin goes so will go MSTR, even if there are brief periods of time when they slightly deviate in price movement correlation. With that in mind, if an investor is interested in taking a position in or adding to a position in MSTY, there needs to be a firm belief in the future growth of Bitcoin. That's significant because if one doesn't understand and believe in Bitcoin and MSTR, it will be easy to exit a position and experience potentially large unrealized losses that they may regret in the months and years ahead. I'm not suggesting holding forever, as I've bought and sold MSTY in the past, but my primary reason for selling was because I had made a nice total return, and when Bitcoin achieved its all-time high, I suspected that we could go through a season where it corrected, along with MSTR, which is exactly what happened. My thinking there is I didn't want to continue holding on when sitting on solid profits, so I sold with the idea of taking another position once I think the correction is over and the rebound is underway. Risk The key risk for MSTY will be if there is a longer period of correction in Bitcoin and MSTR than I think there will be. Under that scenario there will likely be the emergence of even more of a fear trade, and the share price could drop much further than it already has. That would also mean a further decline in distributions, which would make risk-reward must less attractive. Another risk would be concerning those that may not have a strategy in place concerning their income portfolio. In other words, if an investor had, say, a goal of generating $2,000 a month in income from their covered call ETF portfolio, but didn't put an income goal in place that was significantly above that when times of corrections happen, then their income expectations could be in jeopardy if it fell below what was desired and/or needed to live on. For example, with $2,000 as a goal, it would mean one would want to have a lot more coming in than that to cover these types of situations. If there isn't income leeway in place, it means the income needed would be in danger. One potential other risk would be if MSCI delisting were to occur. I think this is more posturing than anything else, but you can never be 100% sure. I'm not going to make any decision on investing in MSTY because of this, but it's something to be aware of and follow. Conclusion Since I see this being a temporary correction that was primarily the result of MSTR dropping in response to the weakness in Bitcoin, I believe MSTY has a very good chance of experiencing a nice rebound along with MSTR when that happens. Not only does that mean that the share price of MSTY will climb once again, but the distributions will be driven higher as a result of that. As mentioned earlier, I don't see the price correction of MSTY being primarily from NAV erosion, but from the performance of MSTR. That's why I'm bullish on the long-term performance of MSTY. These are times that will test anyone's thesis concerning MSTR as an underlying, but nothing has really changed other than the price correction that was expected. MSTY, for the best results, should be a small part of an income portfolio, and not the foundational base of one, as some were suggesting earlier in 2025. That would be a big mistake, even if and when MSTR and MSTY rebound. The reason why is that isn't best practices, and will one day catch up with anyone playing with fire. I see a lot of potential upside for MSTY in its share price and distribution levels. While I would be totally content for MSTY to trade sideways for a long time even as it pays out a high distribution on a consistent basis, it wouldn't bother me if there was some growth included with it.