TSLY ETF lags Tesla stock price as inflows hit $385 million

August 07, 2023 03:30 AM PDT | By Invezz

TSLY ETF lags Tesla stock price as inflows hit $385 million — Image source: Invezz

What is the YieldMax TSLA Option Income Strategy fund?

Tesla is one of the most popular stocks in the market. And this year, it has been one of the best-performing stocks as it jumped by more than 140%. As such, buying Tesla shares is the best direct approach to take advantage of the stock.

The YieldMax TSLA Option Income Strategy ETF is another approach of investing in Tesla using the options market. According to the prospectus, it applies a synthetic covered call ETF.

As I wrote in this article on JEPI, a covered call is a strategy where an investor sells a call option on the underlying asset it already owns. It uses the synthetic covered call approach.

In this case, it owns a synthetic long exposure to Tesla and also invests in US Treasuries. It also provides covered call writing, where TSLA call options are sold against the synthetic long portion of the strategy.

TSLY’s performance has no correlation to Tesla shares. Its performance is impacted by Tesla shares and activities in the options market

YieldMax TSLA Option Income Strategy has gained traction in the past few months. Data compiled by ETF shows that its inflows this year have jumped by more than $385 million. Its inflows reached an all-time high of $188 million in July and it has risen by $50 million this year.

So, is it safe to invest in TSLY? While the TSLY ETF offers an exciting dividend yield, there are risks when investing in it. Therefore, one of the best approaches is to buy the TSLY ETF while simultaneously shorting Tesla shares.

This is a viable investment since Tesla shares have jumped sharply this year and further gains could be limited this year. There is also limited upside for the stock. TSLY will also benefit from the rising implied volatility.

TSLY ETF stock price forecast

The daily chart shows that the TSLY share price has drifted downwards in the past few weeks. After peaking at $17.57 on July 19th, the shares have moved to a correction zone after falling by over 10% from its peak. The stock has moved above the 25-day and 50-day moving averages.

Therefore, there is a likelihood that the stock will rebound in the coming days. If this happens, the next key level to watch will be at $17.57, the highest point this year. Despite all this, I still believe that TSLY is a risky investment.

The post TSLY ETF lags Tesla stock price as inflows hit $385 million appeared first on Invezz.

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