Covered Writing ETFs: Tesla $TSLA $TSLY (Preview)

By Lawrence G. McMillan

I thought we’d take a look at one of these covered writing ETFs that did not have to do with such volatile things as Bitcoin or AI.  TSLY, the one on Tesla (TSLA) immediately came to mind.  This might have been the first such ETF that was issued by YieldMax.  It was launched in November 2022 and began paying dividends in January 2023.

I believe the initial offering price was $40.  The accompanying chart indicates that, and there haven’t been any splits.  As with the other ETFs that we have discussed in this series of articles, the strategy is the same for TSLY:

1) a synthetic long stock position is created by buying calls and selling puts with the same terms
2) income is generated by selling call credit spreads against that synthetic long stock
2a) additional income is earned by collateralizing the synthetic stock position with T-Bills
3) a healthy portion of the income is paid out in the form of taxable dividends each month.

Since inception, TSLY has paid out $30.07 in dividends.  So, that is less than the ones we’ve discussed previously – MSTY, CONY, and NVDY.  Those three ETFs have paid out more than their initial price in dividends, over a shorter period of time.  There’s a good reason for that..