NAV erosion in covered-call ETFs: what audited numbers show

What NAV is, and what a distribution does to it

A fund’s NAV is the sum of all its assets less any liabilities, divided by the number of shares outstanding [2]. The market price is the most recent price at which the fund traded [2]. When cash leaves the fund as a distribution, the assets fall by that cash.

The MSTY prospectus states the result as a named risk. When the fund makes a distribution, its NAV will typically drop by the amount of the distribution on the ex-dividend date [1]. Repeated distributions may significantly erode the fund’s NAV and trading price over time [1].

That is the whole mechanism. It has nothing to do with whether the distribution is income or return of capital. A dollar paid out is a dollar the share no longer holds. What the fund earns between payments is what refills it, and a covered-call fund has a cap on that.

The prospectus says the sold call limits participation in the underlying’s gains beyond the strike [1]. The fund expects to participate in all of the losses beyond the premium received [1]. Capped upside, full downside, and a payment every week or month.

The YBTC summary prospectus says it from the shareholder’s side. Distributions in excess of the fund’s earnings and profits are a return of capital that reduces cost basis [3]. The fund may not suit investors who do not want their principal to decrease over time [3]. Both issuers put the sentence in the offering document, and neither puts it on the fund page’s yield tile.

Why there is no price-only return to show

A reader looking for the erosion in a return table will not find it. The returns the issuers publish are total returns. The YieldMax annual report’s growth-of-10,000 chart uses total return NAV performance and assumes reinvestment of dividends and capital gains [5]. The NEOS fund page defines its distribution rate as one payment multiplied by 12 and divided by the ex-date NAV, and says the rate is not the fund’s total return [4].

No fund in this set prints a price-only return series. So the erosion lives somewhere else: in the NAV-per-share line of the audited financial highlights. That line prints what one share was worth at the start of a period and at the end, beside what was distributed in between. The table under this page is that line for four funds, from each fund’s own report, on the split-adjusted basis the report uses.

The rows that carry the argument

Two rows say it without help. For MSTY’s fiscal year ended October 31, 2025, NAV per share went from $145.30 to $54.39 [5]. The fund distributed $119.48 per share, of which $114.09 was return of capital, and the reported total return was 4.95% [5].

For YBIT’s fiscal year ended October 31, 2025, NAV went from $63.75 to $44.02 with $36.66 distributed [5]. The reported total return was 31.22% [5]. A positive total return and a share worth a third of what it was are the same audited row, because the return assumes every payment was reinvested.

The other two funds show the same shape over shorter records. BTCI’s NAV went from $58.95 to $43.97 over the seven months to December 31, 2025, with a reported total return of negative 12.50% [6]. Over the unaudited six months to June 30, 2026, it went from $43.97 to $26.85, with a reported total return of negative 30.14% [7]. YBTC’s NAV went from $49.32 to $28.42 over the fiscal year ended December 31, 2025, with $21.63 distributed and a reported total return of negative 3.45% [8].

Every row is in the table under this page with its source. A dash in the return-of-capital column is the report’s own dash. The share of each period’s payments that was return of capital is on each fund’s own page: MSTY, BTCI, YBTC, and YBIT.

What this page does not do

It does not forecast. NAV decay is a number a reader can assume in the ETF income calculator. The calculator holds the payment and the return-of-capital range constant and prints the audited series beside the result. Nothing on either page projects the series forward.

It does not compare the funds against each other. Four NAV lines from four products with different underlyings, start dates, and payment schedules are four facts, not a league table. And it does not say what to do with the facts, because that is not what this site is for.