Summary YieldMax COIN Option Income Strategy ETF (CONY) offers superior total return potential versus ULTY due to heightened bitcoin volatility and higher implied volatility in COIN. I maintain a cautious stance on both funds, but see CONY as offering a more balanced return/risk profile with their current volatility regimes. I am seeing a divergence between equity volatility and bitcoin volatility. I expect equity volatility to remain muted, thus negatively impacting ULTY’s income generation and total return potential relative to CONY. CONY and ULTY: previous thesis and new developments I last analyzed the YieldMax Ultra Option Income Strategy (NYSEARCA: ULTY ) on Sept 16 with an article titled “ULTY ETF: Capital Erosion Likely To Worsen In H2 2025”. The article focused on ULTY’s latest dividend payouts and capital erosion concerns and gave the ETF a sell rating. As for the YieldMax COIN Option Income Strategy ETF ( CONY ), I last analyzed it on Aug 20 with an article titled “CONY: I Expect Muted Volatility For Cryptocurrency Ahead”. That article was triggered by the regulatory clarity and market maturation for Coinbase Global Inc. ( COIN ) stock at that time. It rated the CONY ETF as a hold rating. Since then, there have been a few material changes evolving around both ETFs, both in terms of macroscopic parameters and also fund specifics. In the rest of this article, I will focus on the top 3 changes on my list: the changes in their yield outlook, the changes in equity volatility, and also the changes in bitcoin volatility. These changes have led me to see higher bitcoin volatility and muted SP500 volatility in the near future (say the next 6~12 months). This outlook in turn has led me to see better income potential and total return potential from CONY than ULTY. To start with a proper context, I have a cautious stance on both funds. Many investors are attracted to their high yield (often in the triple digits) and also weekly payouts. However, their historical data have shown that the higher yields largely came at the price of capital erosion, resulting in poor total return. As a reflection, the next chart compares the price change of both funds shortly after their inception. As seen, both ETFs experienced significant losses during this time with cumulative losses of around 80%. ULTY's cumulative loss for the period was -79.24%, while CONY suffered -80.59% loss. Seeking Alpha A price loss of 80% requires a 500% price appreciation to break even, and their yields – as generous as they are - barely made things up. To wit, the next chart illustrates their total returns with dividends included. As seen, CONY consistently outperformed ULTY in the past. Since mid-2024, ULTY's total return finished at a miserable 0.73% (worse than a boring CD account) while CONY achieved a slightly better total return of 8.76%. With this background, I will explain why CONY’s total return is very likely to be superior to ULTY in the near future. Seeking Alpha CONY and ULTY: fund facts Before going into further specifics, a quick recap of the basic fund facts could become handy for the remaining discussion. The key behind both CONY and ULTY’s high yields lies in their use of options overlay as detailed in their fund homepage below: CONY fund overview: CONY aims to generate monthly income while providing exposure to the price returns of Coinbase Global Inc. stock ( COIN ), subject to a cap on potential gains. The fund utilizes a synthetic covered call strategy via standardized exchange-traded and FLEX options, which consists of three elements: i) synthetic long exposure, ii) covered call writing, and iii) US Treasurys for collateral. ULTY fund overview: ULTY ’s investment sub-adviser will typically select between 15 and 30 Underlying Securities, primarily on the basis of such securities ’ implied volatility levels, and will regularly review ULTY ’s portfolio to determine whether one or more of its covered call strategies should be increased, decreased or eliminated, and whether any such strategy should be implemented on any new Underlying Securities. As such, the key difference between these two funds is that ULTY is exposed to a collection of stocks and their options, while CONY is primarily exposure to one stock (the COIN stock) as you can see from the following 2 charts. As seen, the top 10 holdings for ULTY make up a total of 49.85% of the fund's assets. These holdings spread over stocks and ETFs from various market segments selected by their implied volatility. The largest holding is Broadcom Inc at 5.47%, followed closely by Palantir Technologies at 5.36%. Note that the fund also has a good degree of bitcoin exposure with the iShares Bitcoin Trust ETF as the fourth-largest holding at 5.24% and Coinbase the tenth largest holding accounting for 4.13% of its total asset. In contrast, the top holdings of CONY are much simpler with a high level of concentration on COIN derivatives. The single largest position is the Coin 12/19/2025 390 put option, which makes up 31.67% of the portfolio. This is followed by a significant holding in United States Treasury Bills with a 10.17% weight serving as its collateral. The fund also holds several other call options on COIN stock as seen. Seeking Alpha Seeking Alpha Equity volatility vs. Bitcoin volatility Bitcoin and bitcoin-related assets have historically demonstrated higher volatility than equity on average. As a result, ULTY has historically generated lower yield than CONY. As an example, the chart below compares the dividend yields for both ETFs since their inception. As seen, ULTY’s dividend yield (blue line) has been lower than CONY’s yield (orange line) in this entire period. CONY’s current yield of 157% is higher than ULTY's 125% yield by about 32 percentage points. Seeking Alpha Looking ahead, I expect SP500 volatility to remain muted in the near future while bitcoin and COIN volatility to heighten. As such, I see better yield potential and also total return potential from CONY than ULTY. To wit, the chart below displays the CBOE S&P 500 Volatility Index ( VIX ) level, which reflects the overall volatility for the equity market. The index experienced several sharp, significant spikes, notably in 1H of 25, where the level briefly exceeded 45. In recent months, the VIX has been staying in a relatively stable range around its long-term average of 17.28 as seen. The spikes in 1H 2025 are largely due to the tariff disputes started around the so-call liberation day earlier in April 2025. At this point, my view is that the uncertainties entailed by these disputes have largely dissipated already and thus I anticipate equity volatility to remain muted in the near future. Seeking Alpha In contrast, in my model, the top drivers for bitcoin’s volatilities are global regulatory clarity (or more precisely, the lack of), lower and widely-fluctuation liquidity, and the more pronounced participation of retail investors. The recent deep bitcoin price correction (almost as deep as 30%) shows that these uncertainty are still ongoing and will keep bitcoin volatility elevated in my assessment. As for COIN stock and consequently CONY fund, the COIN stock and bitcoin prices (represented by BTCUSD) are highly correlated as you can see from the next chart. The overall average correlation for the past 3 years is a strong 0.799. Furthermore, the correlation has consistently remained positive, never dipping below 0.25. The current reading is 0.854, slightly above the average historical correlation. Seeking Alpha Other risks and final thoughts As another indication for CONY’s more favorable income generation potential, COIN’s current Implied Volatility (IV) is also quite high by historical standard, providing a favorable pricing environment for its options. To wit, the following table (taken from MarketChameleon ) shows that the current IV of COIN stock is 58.5. This puts it in the 24% percentile rank in the past 52 weeks. Put it differently, it that only 24% of the time the IV was lower in the last year than the current level. Furthermore, note the massive difference in their turnover rates: CONY has a turnover of 27% (which is already quite high in my view), while ULTY has an extremely high turnover of 717%, reflecting very frequent trading. A higher turnover rates tend to correlate with higher trading friction, higher fees (ULTY charges 1.3% fee vs. CONY’s 1.22%), and stronger tax headwinds. Finally, as a downside risk for CONY, its higher yield comes at the cost of higher price volatility risks and concentration risks as illustrated in the last chart. As aforementioned, CONY is exposure to COIN only, while ULTY's holds a more diversified portfolio of stocks and funds. Also note that CONY's assets in its top 10 holding add up to 150%, which is not only significantly higher than ULTY's 49.85% and also higher than 100%, suggesting a substantial degree of effective leverage via its option positions. All told, this comparison of CONY and ULTY is motivated by recent changes in both macroscopic parameters and also fund specifics. The central issue I am seeing now is a divergence between equity volatility and bitcoin volatility. I expect the former to remain muted while the latter to heighten, thus impacting the yield outlook and total return potential for these fund in opposite directions. These considerations have led me to see a more balanced return/risk curve for CONY than for ULTY. COIN IV Seeking Alpha
