If I were to tell you that there's currently a dividend-focused exchange-traded fund (ETF) on the market with a potential dividend yield of 7.6%, most passive income investors would jump at the chance.

After all, a 7.6% yield is well above what most ASX dividend shares currently offer – at least those that don't have a high risk of cutting their dividends. A 7.6% yield also comfortably exceeds the returns you can currently expect from alternative investments like term deposits and government bonds. Particularly given the Reserve Bank of Australia (RBA)'s interest rate cut this week.

That's exactly what the BetaShares Australian Top 20 Equities Yield Maximiser Complex ETF (ASX: YMAX) seemingly offers investors today. YMAX units pay out dividend distributions every quarter. Over the past 12 months, the four investor payments that unitholders have enjoyed total 58.19 cents per unit. At the current (at the time of writing) unit price of $7.64, that gives YMAX units a trailing yield of 7.62%.

So, should passive income investors rush out and secure this hefty dividend yield without further question?

Well, as the name implies, this is a rather complex ETF. And it is arguably prudent for investors to understand how it works before adding it to their passive income portfolios.

YMAX ETF: Why does it yield so good?

To start with, this ASX ETF holds a portfolio that consists of 20 of the largest ASX blue-chip shares on our market. These include everything from BHP Group Ltd (ASX: BHP) and Commonwealth Bank of Australia (ASX: CBA) to CSL Ltd (ASX: CSL) and Wesfarmers Ltd (ASX: WES).

Normally, that would not be enough to get a fund to yield over 7%. But YMAX fills in the gap by employing derivatives, specifically those known as 'covered calls'. These are designed to generate income and additional returns if the broader market falls in value.

There are two things investors should keep in mind before they buy into the YMAX ETF.

Firstly, this strategy can boost a fund's passive income potential, but it can come at the expense of the overall returns investors enjoy. To illustrate, the YMAX ETF has returned an average of 10.74% per annum over the five years to 30 April. A simple index fund, say the BetaShares Australia 200 ETF (ASX: A200), would have returned 12.35% per annum (that's share price growth plus dividend income) over the same period.

Secondly, using derivatives is expensive. The YMAX ETF charges a management fee of 0.64% per annum, while the A200 ETF charges just 0.04% per annum. This can significantly eat into investors' returns.

Foolish takeaway for passive income investors

Buying the YMAX ETF might suit investors who invest solely for passive income if it is added to a diversified dividend portfolio. But for investors who want to enjoy the highest rate of returns they can get from their portfolios, there might be more appropriate investments to consider instead.