CHPY: Extreme Yield ETF From Semiconductor Stocks And Options

The YieldMax Semiconductor Portfolio Option Income ETF targets high current income, paid weekly, via options strategies on a concentrated semiconductor portfolio.CHPY offers a striking 40.06% distribution rate but has underperformed the SOXX benchmark by 20 percentage points since inception.The fund's value tilt within the sector is incidental; selection prioritizes liquidity and implied volatility, not fundamentals.CHPY's high expense ratio, short track record, and variable ROC warrant caution, as well as the track record of older, similar ETFs.Quantitative Risk & Value members get exclusive access to our real-world portfolio. See all our investments here » Jonathan Kitchen/DigitalVision via Getty ImagesThe YieldMax Semiconductor Portfolio Option Income ETF (CHPY) is an actively managed ETF launched on April 2, 2025, with a primary objective of current income and a secondary objective of capital appreciation via a portfolio of semiconductor companies. CHPY has an expense ratio of 1.03% and a very high distribution rate of 40.06%. Distributions are paid on a weekly basis. CHPY is a mid-size, liquid ETF, with $428 million in assets under management and an average daily trading volume of $15 million. The fund’s issuer, YieldMax ETFs, specializes in options-based income ETFs with extreme yields, such as this one.As described in the prospectus by YieldMax ETFs, between 15 and 30 semiconductor companies are selected based on the liquidity of their common stocks and options, their price level, and implied volatility. The fund buys these stocks and uses options strategies on them to generate income through option premium. The most common strategies used by the fund are covered call spreads.A covered call spread consists of investing in an asset, selling (“writing”) one or more call options on it for a premium, and buying a call with a higher strike price for the same expiration date. Compared to a simple covered call, buying an additional call reduces the premium income but also limits the risk of loss when the underlying stock price surges beyond expectation. This strategy provides income from the option premiums and exposure to the price of the underlying asset with limits to the upside and the downside.The fund usually uses options on the stocks held in the portfolio but may also use options on a semiconductor ETF. Additionally, the fund holds cash or short-term treasuries serving as collateral for the options strategies and contributing to income generation. The fund’s turnover rate was 16% in the most recent fiscal year (for the equity part only).CHPY has 99.7% of net asset value in securities of 25 companies (common stocks and ADRs) and 78 positions (long and short) in call options on these securities. The portfolio is quite concentrated. The top 10 holdings, listed below, represent 49.9% of assets, and the largest position, Nvidia, weighs about 8% at the time of writing.TickerNameWeightNVDANVIDIA Corporation8.06%AVGOBroadcom Inc.6.91%LRCXLam Research Corporation5.71%ASMLASML Holding N.V.5.11%KLACKLA Corporation4.31%TSMTaiwan Semiconductor Manufacturing Company Limited4.26%MUMicron Technology, Inc.3.94%ADIAnalog Devices, Inc.3.89%LSCCLattice Semiconductor Corporation3.86%AMATApplied Materials, Inc.3.83%The portfolio composition is an example from 3/5/2026 and may have changed by the time you read this.Compared to the industry benchmark iShares Semiconductor ETF (SOXX), CHPY has value characteristics. It is cheaper based on valuation ratios and has lower growth rates, as reported in the table below. Nonetheless, the primary selection criteria for constituents are liquidity and implied volatility. The fund’s value tilt is not typical of the strategy and is most likely a random feature.CHPYSOXXP/E TTM40.8243.18Price/Book6.047.65Price/Sales7.559.42Price/Cash Flow24.3227.65Earnings growth13.72%14.30%Sales growth %3.97%5.58%Cash flow growth %6.10%11.52%Data source: FidelityCHPY has underperformed SOXX by 20 percentage points in total return between its inception and March 5, 2026 (about 11 months). The fund has a short history, and this gap may not be representative of its long-term potential.CHPY vs. SOXX total return (Seeking Alpha)In this time frame, CHPY has gained 26% in share price, versus 100% for SOXX.CHPY vs SOXX price return (Seeking Alpha)The weekly distributions are on a slow uptrend, as plotted on the chart below. Once again, the track record is too short for long-term assessment.Weekly distributions (Chart: author; data: YieldMax ETFs)The part of the distribution that is return of capital (“ROC”) varies greatly, between 0% and 100%. It may be an issue for tax predictability and has an impact on the net profit of an investment in CHPY. For example, the distribution paid on March 5, 2026, was 89.68% ROC and 10.32% income, as reported below.% ROC (YieldMax ETFs)The next table compares characteristics of CHPY and the three other funds of the YieldMax Portfolio ETF series:CHPYGPTYLFGYMINYInception04/02/202501/22/202501/13/202502/26/2026Expense Ratio1.03%1.06%1.02%1.01%AUM$427.62M$63.73M$102.63M$3.65MAvg Daily Volume$15.39M$1.37M$2.22M$953.38KDistribution rate40.06%30.62%55.36%9-Month Price Return7.71%-18.74%-44.73%CHPY is the most liquid ETF of the series and was the best at preserving asset value over the past nine months.Single-stock YieldMax ETFs with a longer history, such as SMCY (reviewed here), AMDY (reviewed here), and those based on the Magnificent Seven, show a general pattern of decaying asset value and underperforming their underlying stock in total return, despite stunning distribution yields. CHPY is likely to follow the same path.CHPY is designed for investors seeking to combine income and capital appreciation. The latter may only be achieved by reinvesting a large part of the monthly distribution, based on yield and price trend.This article answers these three main questions about CHPY:Editor's note: This article is intended to provide a general overview of the ETF for educational purposes only and, unlike other articles on Seeking Alpha, does not offer an investment opinion about the ETF.Quantitative Risk & Value (QRV) provides you with risk indicators and data-driven, time-tested strategies. Get started with a two-week free trial now. This article was written byAnalyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.