MARO: Elevated Risk Due To Bitcoin Exposure

Summary MARO offers a massive 125% yield by harnessing MARA’s volatility, but its synthetic option strategy carries high risk and caps upside potential. The ETF is best suited for aggressive income seekers, not for growth or capital preservation, due to its declining price and speculative underlying asset. Distributions are inconsistent and not tax-efficient, making MARO more appropriate for tax-advantaged accounts and those who can handle payout variability. I rate MARO a hold, given the speculative nature of MARA, crypto volatility, and the risk of capital deterioration if sentiment shifts negatively. Overview YieldMax funds have earned a reputation for providing investors with a dividend yield that can be life changing under the right circumstances. I’ve covered a ton of these funds in the past, and I’ve always avoided a few specific ETFs due to the speculative nature of the underlying business. YieldMax MARA Option Income Strategy ETF ( MARO ) is one of the ETFs that I avoided because of the level of uncertainty around the business and the large levels of volatility. However, it’s this level of volatility that allows MARO to reward shareholders with a distribution rate that currently sits around 125%! MARO implements an option strategy that aims to harness the volatility of MARA Holdings ( MARA ). If you aren’t familiar, MARA is one of the leading Bitcoin ( BTC-USD ) mining and digital asset technology companies in the world. The core of their business is essentially operating Bitcoin mining machines as well as validating transactions and securing the blockchain. Additionally, the business holds a large Bitcoin treasury, which causes the share price of the stock to change rapidly. If we look at the price of Bitcoin and MARA below, we can see the clear correlation over the last few years. Data by YCharts As we all know, Bitcoin is one of the most volatile assets on the planet, and this has always caused me to stay away from MARO. YieldMax funds have a poor reputation for deteriorating investor capital, and I feared that a decline in Bitcoin would cause MARO’s price to collapse. While MARO is trading substantially below its inception price, the decline isn’t nearly as bad as some YieldMax peers. MARO launched recently during December 2024, and the ETF has a gross expense ratio of 0.99%. Looking at the performance since inception, we can see how the price has declined by over 49%. When including all distributions paid out to shareholders, the total return still sits around a loss of 13%. So let’s look at the fund strategy to determine whether or not MARO is worth the risk. Data by YCharts Fund Strategy MARO is a synthetic option ETF that is aimed at capturing the volatility of MARA. The term ‘synthetic’ means that MARO doesn’t actually own any common shares of MARA, so it’s essentially writing options on a stock it doesn’t own. The synthetic nature of the fund means that there is an increased risk profile since MARO can experience price losses that are much larger than the actual declines that Mara Holdings. Over time, the price disconnect can increase substantially, especially if Bitcoin experiences a large run upward. So if you want exposure to Bitcoin or Mara Holdings, you’d be better off simply buying the underlying of each. For instance, MARO’s holdings reveal that it doesn’t actually hold any common shares or Bitcoin. MARO Holdings (YieldMax) MARO is best utilized by income investors that want to collect a high stream of cash flow. Investors should be aware that following the fund’s price decline so far, the ETF is very unlikely to experience any sort of positive growth, price resilience, or stability in the future. The highly volatile nature of Bitcoin and MARA makes me certain that MARO isn’t really useful for anything else except income generation. In order to generate the necessary income to fuel distributions, the fund chooses to simultaneously purchase ATM (at-the-money) call options and sell put options. The prospectus explains that in order to generate the option premiums, MARO sells OTM (out-of-the-money) call options that typically have a strike price somewhere between 0% and 15% above the current market price of MARA. The fund documents provided the helpful table below that can help explain the process. MARO Prospectus However, a significant drawback of option funds is the capped upside potential. Growth is essentially limited to whatever the selected strike price is. So if MARO writes an option and selects a strike price that is 5% above MARA’s market price, but MARA increases by 15%, MARO’s growth is capped at that 5% premium strike price. When this strategy is implemented over a prolonged bull market, MARO is aligned to underperform. The best-case scenario would be for MARA and Bitcoin to trade sideways or slowly rise for an extended period of time, so that MARO can capture both the growth while also rewarding shareholders with the premiums. Performance Scenarios And Risk Since MARO’s inception is so recent, we are working with a limited performance history to reference. When including all distributions that were paid out, MARO’s total return has closely tracked the overall performance of MARA Holdings. As we can see below, MARA has a total loss of about 12.4%, while MARO’s total return sits at a loss slightly over 13%. There are a few scenarios that can play out here. Data by YCharts Scenarios MARA Holdings Rises In Value: In this scenario, MARO would likely underperform since the upside participation is capped by the option strategy. This is especially true if MARA’s price appreciates rapidly over a short period of time. Additionally, as MARO’s price increases, the distributions may also increase. This would be the most ideal scenario for the fund. Bitcoin stabilizes and MARA Trades Sideways: If prices were to remain flat for MARA, MARO would likely see lower payouts, but they would become more consistent in amount. Due to the generous payouts, there’s a possibility that MARO’s price would ultimately trend downward if the payouts were not reduced from their current levels. However, a sideways moving price would still provide an environment where the total return can be positive as the distributions are paid out every four weeks. MARA’s Price Decline Continues: Bitcoin has crossed new highs recently, and if the price retracts from here, MARA is likely to also suffer from a downside move. In this scenario, I would expect higher levels of volatility and for MARO’s distributions to remain in their elevated range. However, the total return of MARO is likely to remain negative, depending on how drastic the downside movement is. These are all theoretical possibilities for MARO, and I’ve used the performance of other YieldMax funds as a reference. MARO isn’t the only fund that has some sort of indirect exposure to the crypto markets, so there are plenty of examples to choose from. Some of YieldMax’s relevant funds with indirect crypto exposure are the following: Yieldmax MSTR Option Income Strategy ETF ( MSTY ): Writes options on Strategy ( MSTR ), which also has a ton of Bitcoin exposure. YieldMax COIN Option Income Strategy ETF ( CONY ): Writes options on Coinbase ( COIN ). YieldMax Bitcoin Option Income Strategy ETF ( YBIT ): Aims to directly seek exposure to the price of Bitcoin. YieldMax Crypto Industry & Tech Portfolio Option Income ETF ( LFGY ): Tracks a portfolio of crypto industry and technology companies. Looking at the price history of these peers below, we can see a very similar story play out on a YTD basis. The history below is limited due to the fact that LFGY was recently launched in January of 2025. Despite Bitcoin being up YTD, all of the mentioned funds below have seen their price decline. These comparisons are just to demonstrate that this is the inherent risk involved with synthetic option ETFs. The price is very likely to see continued downside, even if the underlying assets they track appreciate in value over time. Data by YCharts This is why I want to put emphasis on the fact that MARO should only be utilized by investors that specifically seek income. A fund like MARO may not be a simple buy and hold position, especially due to MARA’s speculative nature. Unlike businesses like Coinbase, MARA Holdings doesn’t have the most reassuring earnings history . MARA has sporadic revenues and operating expenses that can be difficult to predict every quarter. While there may be short-term catalysts for the company, MARA isn’t a stock that I personally feel confident in holding for an extended period. In comparison, a company like Coinbase has different revenue streams that help create a healthier looking balance sheet . Despite all of the optimism in the crypto markets this year, the Bitcoin cycle can shift. If there is a large retraction in the price of Bitcoin, I anticipate that MARO will experience a sizeable decline. As the price declines, so will the distributions, which makes it harder to turn a profit on this fund. So while I am fairly optimistic on the future of crypto, I would prefer to initiate a position in MARO when the cycle isn’t at the height of its optimism. Dividend Utility As of the latest declared distribution of $2.3718 per share, the estimated annual yield currently sits around a whopping 125%. When we talk about a dividend yield this high, the ultimate end goal would be to reach ‘house money’ status. This is the cross point where you receive 100% of your initial investment back in the form of distributions. Since MARO offers a yield that is over 100%, an investor should technically be able to collect their initial investment back in less than twelve months, assuming that payouts remain the same. The only issue is that payouts tend to be wildly different every four weeks. A new payout is declared every four weeks and is determined by the underlying success of the option strategy, the price movement of MARA, and overall market volatility. As we can see below, the payouts have been varied since the fund’s inception. Only four weeks ago, MARO experienced the lowest payout since the fund’s inception, so conditions around the yield can change rapidly. MARO Dividend History (Seeking Alpha) If you haven’t already, I would highly suggest going to the YieldMax site and reaching out to them to request being added to the distribution list. You will receive emails that detail the specific payouts each week. As we can see below, the latest distribution brings the estimated annual rate to slightly over 125% and was paid out on 7/18/2025. What stands out the most to me is that 0% of the distribution was funded using the return of capital. MARO Distribution Announcement (YieldMax) Usually, YieldMax funds put an emphasis on return of capital because they reduce the overall tax burden that investors have to deal with. For instance, I previously covered YieldMax MSFT Option Income Strategy ETF ( MSFO ) and over 92% of the distribution was paid using return of capital. Distributions are likely classified as net investment income, which is considered to be ordinary dividend income. Therefore, we can assume that the majority of the distributions received from MARO will not be tax-efficient, and a position may be best utilized within a tax-advantaged account. Takeaway In conclusion, I rate MARO as a hold for now due to the speculative nature of the underlying focus on MARA Holdings. The fund will also be influenced by the movement of Bitcoin, and I am concerned about how MARO will perform if the crypto sentiment shifts. If Bitcoin and MARA experience a sizeable retraction, MARO will continue to deteriorate investor capital over time. Additionally, the distributions aren’t tax-efficient, which means investors may need to consider the possibility of a larger tax burden at the end of the year.

Source: Seeking Alpha