GraniteShares' 99% Yield ETF: A High-Income Dream or a Capital Trap?

NEW YORK, NY – January 02, 2026 – Asset manager GraniteShares made waves today, announcing weekly distributions for two new exchange-traded funds (ETFs) with headline rates that seem almost too good to be true. The GraniteShares YieldBOOST Top Yielders ETF (YBTY) declared a distribution equating to a 99.19% annualized rate, while its sibling, the GraniteShares YieldBOOST Single Stock Universe ETF (YBST), posted an 81.27% rate.

For income-starved investors in a challenging market, these figures are undeniably seductive. They conjure images of substantial weekly cash flow from a simple ETF investment. However, beneath the surface of these eye-popping numbers lies a complex and high-risk strategy that demands rigorous scrutiny. The allure of ultra-high yield is directly matched by the potential for significant financial peril, forcing investors to ask a critical question: are these funds a groundbreaking income solution or a sophisticated capital trap?

Unpacking the 'YieldBOOST' Engine

The extraordinary yields from YBST and YBTY are not generated through traditional stock dividends or bond interest. Instead, they are the product of a complex options-based strategy. Both YBST and YBTY are structured as “Funds of Funds” (FoFs), meaning they don’t buy stocks directly. They invest in a portfolio of other GraniteShares YieldBOOST ETFs.

These underlying ETFs employ a strategy centered on selling put options. In simple terms, the fund collects an upfront cash payment, or a “premium,” in exchange for agreeing to buy an asset at a specified price (the “strike price”) if its market value falls below that level by a certain date. If the asset’s price remains stable or rises, the option expires worthless, and the fund profits by keeping the entire premium. This premium income is the primary source of the funds' high distributions.

To amplify this income, the strategy introduces another layer of complexity: the underlying options are written on leveraged ETFs. These instruments are designed to deliver multiples (e.g., 2x) of the daily performance of an asset. While this can supercharge the premiums collected, it also dramatically magnifies the associated risks. Furthermore, the funds use a “put spread” by buying cheaper, further out-of-the-money puts to theoretically cap some of the downside. However, this does not eliminate the core risk of loss.

The High Price of High Yield

The most significant trade-off in this strategy is the relationship between income, capital appreciation, and risk. While selling puts generates income, it inherently caps the fund's upside potential. The fund’s main goal is to harvest premiums, not to participate in the full capital growth of the underlying assets.

More critically, the strategy exposes investors to substantial downside risk. If the underlying asset's price plummets, the fund is obligated to buy it at the higher, pre-agreed strike price, potentially leading to immediate and significant losses. This can cause the fund's Net Asset Value (NAV), or its per-share market value, to erode.

This risk of NAV erosion is not merely theoretical. While YBST and YBTY are new, having launched in mid-December 2025 with minimal operating history, the performance of other GraniteShares funds with similar strategies offers a cautionary tale. For instance, the GraniteShares YieldBOOST TSLA ETF (TSYY), which uses a put-writing strategy on a leveraged Tesla ETF, saw its price decline by 75% in 2025. In that case, the capital erosion far outpaced the high dividends paid out. Similarly, the GraniteShares YieldBOOST Bitcoin ETF (XBTY) has shown negative total returns in certain periods despite a triple-digit dividend yield.

This points to a crucial detail in the press release: the distribution may include a “Return of Capital” (ROC). ROC occurs when a fund returns a portion of an investor's original principal as part of a distribution. While it can maintain the illusion of a high yield, it is not a profit. It is effectively the fund giving you your own money back, which reduces the NAV and an investor's cost basis. A high distribution rate fueled by ROC and accompanied by a falling NAV can result in a negative total return, where an investor loses money overall.

An Innovator's Gamble in a Competitive Market

Founded in 2016 and backed by Bain Capital Ventures, GraniteShares has carved out a reputation as an innovator in the ETF space, often launching complex, alternative products. The firm is a market leader in Europe for leveraged single-stock ETPs and is now aggressively expanding its YieldBOOST platform in the U.S. to meet investor demand for income.

This innovation, however, comes at a cost. The expense ratios for YBST and YBTY are 1.38%, which is considerably higher than the average for both simple index ETFs and many competing options-based income funds. Investors are paying a premium for access to this sophisticated, actively managed strategy.

The firm's history with complex products also warrants consideration. While GraniteShares has successfully managed over a billion in assets, it has faced challenges inherent to its high-risk product lineup, including instances in 2025 where European products were suspended or wiped out by extreme market volatility. These events underscore the inherent fragility of leveraged and derivative-based strategies.

Beyond the Headline: A Call for Investor Scrutiny

Financial analysts consistently warn investors to look beyond headline distribution rates and focus on total return, which combines yield with the change in the fund's NAV. “A high distribution rate is meaningless if your principal is eroding at an even faster rate,” one independent analyst noted. “Investors must differentiate between yield generated from profit and distributions that are simply a return of their own capital.”

Experts stress that these types of ETFs are not suitable for all portfolios. They are designed for sophisticated investors with a high tolerance for risk, a deep understanding of options mechanics, and the ability to withstand significant volatility. The complexity of a fund-of-funds structure investing in options on leveraged ETFs is substantial and can be easily misunderstood by retail investors chasing yield.

As GraniteShares continues to push the boundaries of income generation, the onus falls squarely on investors to perform their due diligence. The promise of a 99% yield is a powerful lure, but without a full appreciation of the trade-offs—capped upside, severe downside risk, and the potential for NAV erosion—it could lead to devastating losses. The path to sustainable income is rarely a shortcut, and these new funds are a stark reminder that the highest potential rewards often carry the highest risks.