Be WARY of High Yields!
The yield is very attractive. You might get some different figures, but just using the Bloomberg terminal and look at the most recent payout, you're getting a yield of about 80% on strategy one and about 27% on BTCI. And I think as you're going through these products, just keep in mind there's no such thing as free yield, right? Someone would look at it and sometimes this number hits 100% and someone will say, "Oh my god, I'm going to double my money," but it doesn't really work like that, right?
Sort of where the yield comes from, again, it's from selling all these different options. That yield, by the way, just explain that to our audience. Is that an SEC yield, a 30-day, or what is that based upon? That was just based on the most recent payment by the current price. So, if you smooth it out, it's probably a little bit closer to 100 for the Micro Strategy Pro just because it's been down a little bit. It's a little bit closer to 30% for the Neos product.
They're really hefty yields, and you're getting, but if you would actually look at the price performance versus total performance of the Micro Strategy One, you'd actually be down on a price basis, but you're up. So, which means that all that gain came from income. You're paying taxes on that unless it's an IRA. So, I don't want to make any assumption, but just know that that's a very tax inefficient way to get yield.
Now there's some things you should be aware of, like return of capital versus just regular dividend distribution. So, NEOS will pay most of it on something called return of capital, which essentially you're not taxed on that like a normal dividend. So, you deal with the tax later. Some of the Micro Strategy One is return of capital, but not all of it. So, from a tax efficiency standpoint, BTCI is better.
A lot of people might compare performance between the two. I think the fair way is to look at MSTY versus Micro Strategy and BTCI versus Bitcoin. Not necessarily compare the two. You would have underperformed just holding Micro Strategy if you held MSTY over the year by 60%. That's massive. So, this is why I just mentioned total return is really important.
Don't get hooked on the income. If you care about total return, you would have been better off just holding the stock. BTCI, because it still holds Bitcoin, it tracks a little bit better to Bitcoin. So, I know this is a very long-winded answer about you have to care about all these things when you're looking at it. I would lean towards BTCI. I think for the problems, the yield is good, but I would again be really wary of products that have really high yield.
You have to know about where that's coming from. A lot of times it's eroding itself to just pay you something back in yield. Just be a little bit wary of something that has a very high yield, and I like that it has the upside. It's lagged Bitcoin by a smaller amount than Micro Strategy has lagged its underlying stock. Get very different. Don't just get taken by the yield. And again, for our audience, headline yields can be deceptive. So, don't be focused exclusively on that.
