YieldMax has introduced a new ETF designed to deliver high monthly income by employing an active covered call strategy on the largest companies listed in the United States.

YieldMax’s ‘Target 12’ ETFs aim to deliver an annualized income of 12%.

The YieldMax Target 12 Big 50 Option Income ETF (BIGY US) has been listed on NYSE Arca with an expense ratio of 0.99%.

The fund marks the debut of YieldMax’s “Target 12” ETF series, which aims to provide an annualized income of 12%.

BIGY invests directly in a portfolio of 50 stocks with the largest market capitalizations among US-listed and domiciled firms. To qualify, companies must have sufficiently liquid option contracts, as assessed by Zega Financial, the ETF’s sub-adviser.

Zega will review and adjust the portfolio quarterly, typically weighting constituents by market capitalization while capping exposures to the largest companies to ensure diversification.

While dividend income from these stocks contributes to the fund’s income generation, BIGY primarily targets its ambitious income goal by selectively employing covered call strategies on some or all portfolio holdings. Covered calls involve selling call options on owned securities, allowing the fund to earn premium income in addition to dividends.

This strategy has historically delivered strong performance during bear markets, range-bound markets, and modest bull markets, though it may underperform in strong bull markets where securities rise above their option strike prices. Covered calls limit upside potential but can generate consistent income, especially in turbulent markets, while providing diversification away from traditional equity and bond income sources.

Zega Financial actively manages the fund’s option strategies, aiming to generate current income while capturing a portion of the underlying stocks’ price appreciation. By strategically entering and exiting options positions, Zega seeks to optimize BIGY’s income generation and overall performance, positioning the fund as a compelling choice for investors seeking steady yield.