In this example a BTC covered call vault is used an example. If the options are exercised by the option holder, the BTC held as collateral will be used to purchase BTC at the option strike price. In this scenario, the Vault will hold less BTC than used to mint the options, producing negative yield for the week. However, since the price of the underlying asset has risen, your total funds in USD fiat will have increased regardless.
Since option exercising scenarios are rare, holding funds in the vaults over the long term should counteract negative yields from exercised options.