ETF Of The Week: TSLA Option Income Strategy

YieldMax TSLA Option Income Strategy (TSLY) will be the top exchange-traded fund (ETF) to watch this week. It is already under intense pressure as it has crashed by over 46% from its highest point in 2023 and is now sitting at its lowest level since January last year.


Tesla earnings ahead

The TSLY ETF is also seeing weak inflows as concerns about its performance continue. Data shows that the fund lost over $2.1 million in assets last week. Still, it has added over $205 million this year, bringing the total assets to over $610 million.

The ETF will be on the spotlight as Tesla is set to publish its financial results after the market closes on Tuesday. As I wrote on Monday, expectations are substantially low considering that the electric vehicle industry is going through a dramatic slowdown around the world.

The EV sector is facing many challenges as evidenced by the falling used and new Tesla prices. Other EVs like those made by traditional firms like Mercedes, BMW, and Lucid Motors have been in a strong downtrend. 

Tesla’s price cuts have continued this year, with the most recent one happening during the weekend, which is a sign that the sector is not doing well. 

Most analysts believe that the company’s revenue dropped in the first quarter. The average estimate is that the company’s revenue will be $22.34 billion, down from over $23 billion in the same quarter in 2023. 

The revenue slowdown will be because of the weaker deliveries of 386k and lower selling prices in the US and other countries. All these factors have pushed the Tesla stock price to its lowest level since January 30th.


Tesla has formed a death cross pattern

Worse, as shown below above the Tesla stock price has formed a death cross pattern as the 50-week and 200-week Arnaud Legoux Moving Averages (ALMA) crossed each other. In most cases, this pattern is one of the most bearish signs in the market.

(Click on image to enlarge)

Tesla stock price

Therefore, the focus will be on the TSLY ETF after Tesla publishes its financial results. For starters, TSLY is an ETF that uses covered calls to generate returns for Tesla investors.

Its concept is relatively easy. Its developers buy synthetic Tesla shares and then sell its call options, pocketing the premium. As a result, investors benefit when the stock is rising or when it is flat.

However, as I have written before, while the TSLY fund generates monthly payouts to investors, its performance tends to be worse than that of Tesla. It has dropped by over 45% in 2024 while Tesla has retreated by over 42%.

The same performance happened in the past 12 months as the fund collapsed by over 50% while Tesla’s shares fell by 12.6%. Therefore, if the stock retreats after earnings, there is a high possibility that it will continue falling.

(Click on image to enlarge)


TSLY vs TSLA stock prices

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