Risks of YieldMax ETFs and 0DTE Options for Retail Investors: Amplification by Loss-Chasing Behavior

This report is based on an event involving a retail investor who lost over $180k through YieldMax ETFs (MSTY, ULTY) and options trading, with $97k in borrowed funds exacerbating the loss [8].
YieldMax ETFs, which use complex options strategies to generate high yields, carry distinct risks: MSTY, tied to MicroStrategy Inc. (MSTR) with significant Bitcoin exposure, employs a covered/synthetic covered call strategy limiting upside participation [1][2]. ULTY uses a synthetic covered put strategy, creating indirect inverse exposure to its underlying asset—losing value if the underlying rises [3]. Both funds face path dependency, where market move sequences impact long-term returns [1][3]. Their single-stock (MSTY) and non-diversified portfolios concentrate risk, while high turnover increases transaction costs, and options may face liquidity risk during market turmoil [1][4][0].
0DTE options, expiring the same trading day, pose extreme risks due to rapid time decay (theta) and high gamma sensitivity, where small underlying price changes cause large value swings [4][5]. Their inherent leverage amplifies gains and losses, with selling 0DTE options exposing investors to unlimited loss potential [5][6][0].
Loss-chasing, a psychological bias to recoup losses by increasing risk, compounded these dangers: investors may allocate more capital to high-risk instruments, increasing exposure to their vulnerabilities [4][7]. Frequent trading worsens costs for YieldMax ETFs (high turnover) and 0DTE options (time decay/fees) [1][5]. Borrowed funds add financial leverage, turning losses into obligations including interest and repayment [8].

• Cross-Asset Volatility Linkage
  : MSTY’s MSTR/ Bitcoin exposure ties its risk to unregulated, volatile cryptocurrency markets, interacting with 0DTE options’ short-term sensitivity to amplify losses [2][5][0].
• Widespread Retail Adoption Risk
  : 0DTE options made up 51% of S&P 500 options volume in Q4 2024, and leveraged ETFs attracted $42B in 2025 inflows, indicating growing retail engagement with complex strategies beyond their expertise [5][4][0].
• Behavioral Bias Amplification
  : Loss-chasing transforms strategy-specific risks (e.g., MSTY’s limited upside, 0DTE’s time decay) into systemic financial strain when combined with borrowed funds, as seen in the $180k loss case [8][7][0].

• Risks
  : Strategy limitations (limited upside/inverse exposure), extreme volatility (MSTR/Bitcoin), rapid time decay (0DTE), operational costs (high turnover), liquidity risk, loss-chasing amplification, and leveraged borrowed funds leading to severe financial obligations [1][3][4][5][8][0].
• Opportunities
  : High yield potential (MSTY’s ~140% TTM yield) and short-term trading flexibility for sophisticated investors, but these benefits require advanced expertise to manage associated risks [2][0].

YieldMax ETFs (MSTY, ULTY) and 0DTE options are complex, high-risk instruments unsuitable for inexperienced retail investors. The case underscores that high yields and short-term trading opportunities come with significant trade-offs. Loss-chasing behavior and leveraged borrowed funds magnify these risks, leading to catastrophic losses. Retail investors should exercise caution and seek professional advice before engaging with such strategies.