YieldMax CONY ETF offers high yield but caps Coinbase gains, eroding investor principal and causing tax inefficiency.

YieldMax COIN Option Income Strategy ETF (CONY) promises a 78% yield by using a synthetic covered call strategy on Coinbase shares, but investors have faced a 56.25% loss over the past year, nearly matching Coinbase’s 59.10% drop. The fund caps upside gains through short call options while paying distributions largely made up of return of capital, which reduces cost basis and defers taxes rather than providing free income. Additionally, option premiums are taxed as ordinary income, creating a tax drag not disclosed in the fund’s materials. A cheaper and simpler alternative is to buy Coinbase shares directly or use a broad crypto equity fund combined with Treasury bills for income, avoiding the structural costs and capped upside of CONY.