REX TSLA Covered Call ETF (TSII) seeks to generate income by holding Tesla stock while systematically selling call options against those shares. This covered call strategy captures option premiums to enhance yield while maintaining exposure to Tesla's underlying stock performance up to the strike price of sold calls.
How It Works
TSII employs an active covered call strategy, holding Tesla shares as the underlying asset while selling short-term call options against the position. The fund collects option premiums as income, which are distributed to shareholders as dividends. Call options are typically sold at strike prices above current market levels and rolled monthly or at expiration. This approach generates consistent premium income but caps upside participation when Tesla's stock price exceeds the call strike prices.
Key Features
- Exceptionally high 11.44% dividend yield generated from Tesla call option premiums, significantly exceeding traditional dividend-paying stocks
- Single-stock focus on Tesla provides concentrated exposure to the electric vehicle leader's performance and volatility patterns
- Recently launched fund with 0.00% expense ratio, though this promotional rate may increase as the fund matures
Risks
- This ETF caps upside gains when Tesla stock rallies above call strike prices, potentially missing 20-50% moves during strong Tesla runs
- Single-stock concentration means 100% exposure to Tesla's volatility, which can exceed 50% annual swings and company-specific risks like regulatory changes
- High dividend yield depends on Tesla's volatility remaining elevated; if options premiums decline, the attractive yield could drop significantly
Who Should Own This
Best suited for income-focused investors with moderate-to-high risk tolerance seeking enhanced yield from Tesla exposure over 6-18 month periods. Appropriate as a 2-5% satellite holding for those bullish on Tesla but willing to sacrifice unlimited upside for consistent premium income. Requires comfort with single-stock concentration and options strategy mechanics.