NVDY Investors Choose Monthly Income Over 854% Returns; Here’s What the Trade Costs Them

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NVDY Investors Choose Monthly Income Over 854% Returns; Here’s What the Trade Costs Them

Quick Learning

NVDY’s distribution has fallen from $2.62 monthly in March 2024 to about $0.10 weekly in 2026 as NVIDIA’s volatility moderates and NAV erodes.
NVIDIA is up nearly 24% over the past year and 854% over five years, but NVDY structurally can’t capture those gains because sales are constantly rallying.
NVDY is suitable for cash-oriented investors who accept a slightly declining NAV, but a dividend growth ETF or manually traded covered calls deliver the best returns.
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YieldMax NVDA Option Income Strategy ETF (NYSEARCA:NVDY) makes money NVIDIA‘s (NASDAQ:NVDA) volatility with a compound call strategy, converting option premiums into weekly cash spreads. The fund has been ranked among the top-yielding ETFs, but the key question is whether those shares represent long-term income or a slow return on your money. The answer, based on a May 2026 fact sheet and recent distribution data, is much different than the headline yield suggests.

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How NVDY Produces Its Yield

NVDY owns a small piece of NVIDIA stock (11.5% of net assets) and uses options to multiply exposure, then sells short-term calls at strikes near NVIDIA’s spot price to reap a premium. The rest of the portfolio, more than 80% in Treasury Bills and the money market position of First American Government Obligations, remains as collateral and earns short-term interest.

The income you receive includes the option premium (which measures the implied volatility) and the T-Bill yield. When NVIDIA trades around 40 vol, premiums are rich and spreads are widening. When volatility tightens or NVIDIA rallies past a short strike, the numbers turn against management. NVDY tops the sold strike, meaning that if NVIDIA rises 15% in a month, the fund takes 3% to 5% while the call is issued or folded at a loss.

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Distribution Trend Tells the Real Story

NVDY’s payment history is one of the most important security indicators. In March 2024, the fund paid $2.62 per share in one month. By mid-2024, monthly distributions were still running above $1.00. As of July 2, 2026, the weekly payout was $0.0984, with recent weeks ranging between $0.08 and $0.15. Even if it is made annually in all 52 weekly payments, the current value decreases significantly in the 2024 pace.

That decline reflects two forces. Notable volatility for NVIDIA has been limited as the stock grows into a mega-cap, depressing the premiums that NVDY can reap. During that time, the fund had to finance multiple distributions at times when NVIDIA met with a short, NAV-destroying strike to pay it all. NAV erosion is the silent tax of an ETF: the yield looks good on paper, but the price per share declines over time.

Full Refund, Not Just Withdrawal

NVIDIA itself has returned about 24% over the past year and more than 854% over five years. NVDY, by design, cannot match that because all logical motion is disabled. Investors who bought NVDY in search of “Nvidia income” have amassed huge dividends but have watched the stock price plummet as NVIDIA rallied. The tradeoff is real money today for compounding tomorrow.

Compounds average 1.09% interest rate. At $1.37 billion in net assets, that’s a reasonable bump compared to holding Nvidia and selling bundled phones to a personal account.

The decision

Distribution machines are working. Treasury securities are safe, and premium income will continue to flow as long as NVIDIA trades at reasonable volatility. At stake is the size of the check. Distributions have already fallen significantly from their 2024 highs, and there is no structural reason to expect a return to those levels without a new volatility regime.

For investors who understand that they are trading upside for cash flow and are comfortable with a slowly eroding NAV, NVDY serves as income. For anyone who holds it as a proxy for owning NVIDIA, the past year has been an expensive lesson. A lower-yielding alternative such as a broad-based ETF to maximize profits, or holding NVIDIA and selling covered calls in the option, will often produce a better return.

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