Yes Jepi has done relatively well this year but it doesn’t make sense to compare it to a S&P500, nor is it performance because of it’s covered call strategy which I am criticizing. JEPI has a actively managed defensive fund. It is heavily weighted towards defensive stocks, if you look it’s top 10 holdings they are all up this year some with significant gains as they are defensive stocks. A better comparison would be to compare it against a defensive fund such as XLU, XLV or XLP (utilities, healthcare, staples) all which are marginally up this year. So if you want similar defensive exposure as JEPIs stock holding provide buying these ETFs would provide better returns.
Thanks so much for this video. I haven't seen this explained to me like this before and it helped talk me out of dumping a ton of money into covered call ETFs
Yeah JEPI isn’t nearly as bad. It is actively managed so that should be better for covered calls then the automated atm strategy like QYLD. It has underperformed about 2% per year and is fairly new so we will see how it keeps up as it ages.
Moreover, with JEPI the percent changes in the monthly payments have not been closely correlated to percent changes in the underlying, up or down - at least so far.
Thanks and I just sold my 20 shares of QYLD and my 4 shares of RYLD. I will stick to Main Street Capital (BDC) with dividend growth of 5.61%. I am investing for retirement income and have no time to waste. Smile.
If you like BDCs, look at BIZD. It holds several BDCs inside. It's a fund of funds. But, don't let the stated expense ratio of over 10% scare you. The actual expense ratio is .4.
JEPI does well in sideway and bear markets because the covered call strategy thrives in volatile markets with a high dividend income payment , in a bull market you want growth in qqq or vti/voo. Jepi will be underperforming in a bull market and possibly provide lower income dividends. I don’t have any other covered call etf. The downside of jepi is decreased vs s&p during bear market and one still gets a fat dividend monthly. Just note that on ex dividend day, the jepi etf decreases the share price by the amount of pay out but also recovers soon after if the market goes up.
Jepi certainly is better then a lot of other CC etfs 👍. Pretty much only upwards drifting sideways markets are ideal for covered call etfs where they can outperform while making gains. You can say because of the covered call strategy there is less downside during a bear market. But you sacrifice a lot during the recovery or during bear market rallies. And if you want to do well in a bear market investing in assets that gain is best rather then just just having a smaller drawdown.
JEPI and DIVO are certainly not as bad. Your unlikely to see them blow up but you’ll end up underperforming maybe a couple percent per year compared to buying the index and selling shares in the long run. Might not be a a lot but it does add up.
@@balancesheetsmatter Yes, but if we have a long, drawn out bear market, then these yields would be very lucrative. It serves a purpose in a portfolio.
I guess they lose less during the down moves in bear markets. But the fact is they are losing you money. If your looking for bear market protection there are better strategies. Even during our current 2022 bear market plenty of defensive stocks have been making significant gains. I have plenty of stocks up 20-50% so those have served me a lot better then covered call etfs. Without picking individual stocks defensive sectors like XLU and XLV would serve much better to protect a portfolio during a bear market. Ideally during bear markets you can profit/breakeven off your defensive plays and then move that money into equities that are undervalued.
@@balancesheetsmatter Yes, they do lose you a lot less money during the bear market, and they also underperform other etfs like XLK, QQQ, SPY during a bull run. I use JEPI and JEPQ as my stable source of passive income which I further use to buy other dividend paying stocks. Most of my JEPI and JEPQ is in my roth or 401k so that makes it tax efficient as well.
What if you never sell and always reinvest your dividends? My goal is that in 20 years I will have a good amount of income every month. These are held in a roth ira.
Thanks for posting this video. It's one of the few that tells the truth of QYLD and others like it. The only way to make a covered call strategy work for steady income over the long term would be to combine it with some form of strong downside protection and then reinvest any proceeds that come from that protection. But at this point, the protection is eating into your yield so much you may as well buy something else like dividend stocks, bonds, etc.
I’m retired for 2 years now. I’m in 50% VOO, 25% JEPQ, and 25% JEPI. All my expenses are paid by distributions. I sometimes have left over distributions that get reinvested. I have yet to sell one share. I understand that doing a bucket strategy might save me on taxes and might bump up my returns a tad. I just can’t wrap my head around selling shares. I like that I have more shares than when I retired and no market timing is required.
It seems to be the physiological effect of “selling shares” that most people don’t like and is why they like covered call ETFs as there is the illusion they have the same amount of shares which is untrue. While holding JEPQ the amount of shares you own of JEPQ may stay the same but the underlying stocks each share represents is decreasing over time. So the ETF managers as essentially doing this job for you in a incredibly inefficient manner through covered calls. In comparison I could create a “income etf” with the sole strategy of slowly selling shares to create a similar yield and outperform all these covered call etfs… your shares you own of this ETF would stay the same but the underlying stock ownership would slowly be reducing.
@@balancesheetsmatter You make good points. I think funds like CLM and CRF absolutely sell shares of the underlying in order to pump yields. Not aware of JEPI or JEPQ doing so. I’m happy with my allocation and hope to add DIVO once I’ve reached my targeted number of JEPQ and JEPI shares.
Excellent points. My question is: If selling shares is a person’s retirement, what happens when he/she runs out of shares? Doesn’t their income then suddenly drop to zero? How does someone account for that?
You certainly need to take this into consideration. You should look up the 4% rule which shows historically you can sell 4% of the s&p500 index per year safely for retirement. Obviously selling more is risky especially if there is a large long downturn in the market. If this were to happen covered call etf / or selling shares at a equivalent rate would not be safe for retirement.
Doesn't the dividend payout depends on your amount of shares and not the $ amount? And lets say if the divi cut in 50% due to a crash but that also means we are able to buy more shares and make up for the divi cut as well,right?
The “dividend” payout is a percentage of the stock price. Yes you could buy more shares if you have the cash available to do so. Alternatively you could just buy more shares of the actual index such as the $SPY and get greater returns. Buying and etf of the underlying index and selling shares to create needed income will always outperform covered call etfs in virtually every scenario.
@@truckertra4489 at 400k, I don't think I'd be buying qyld. Some jepi for secondary income, but probably indexs for the rest. As much as I enjoy the funds, I don't think the entire portfolio being one is a good idea.
@@balancesheetsmatter year to date QQQ has lost 26%, QYLD has lost 24% without dividend reinvestment. Also QYLD has been paying this whole year in option premium distributions monthly. If you buy shares at a historically low price and the share price goes up, you also get a higher option premium distribution as the percentage payout works going up, too. You can use that income short term say if you get laid off or reinvest. And you can use it to boost other investments contributions if you reach your income goals. Plus if you're old and want income that can get passed on to your decedents, this beats annuities. It has lots of uses and spreads your investments beyond just a capital appreciation alone strategy like a passive index investment.
Hello, I am just about to embark on this CC journey and found your video informative. Question if the avg yearly yield on BXMX was 6.7%, then a hypothetical 10k still made money..Not as much as the benchmark index would have yielded. Is my understanding correct? In otherwords, 10k Principal still intact plus 6.7% avg yield for 10 years. Welcome your feedback.
@@srinip825 the principle from BXMX was not intact after going though the 2009 crash. So you can get large drawdowns that don’t recover. If you plug BXMX into a drip calculator if you reinvested all dividends you ended up with a 6.6% average yearly return but if you didn’t reinvest dividends you ended up with a 3% yearly return. So the returns end up being pretty bad if you don’t reinvest the dividends. And if you’re reinvesting the dividends why not just buy an S&P500 index fund.
Please do your back-test for a period that includes extended flattish market conditions. Or do your back-test for a long duration bear market of over 50% and see if your strategy has any money left. A ten year back-test over a mostly raging bull market is not exactly a rigorous test, its actually the worst case scenario for CC ETFs. I think your results will be vastly different. Kind of a rhetorical request as these types of ETFs have not have not been around in many market conditions.
Well in this video I backtested BXMX through the 2008 bear market (2004-2014). Not really a raging bull market. But pretty much the most bearish period these covered call etfs have gone through to compare against. It’s also to show they do not hold up well during significant draw downs, so in a more bearish environment both buying the index and selling shares and covered call etfs will perform like crap. There are hypothetical backtested index’s specifically the CBOE buy/write index which from 1986-2012 outperformed the S&P500 slightly. 830% returns vrs 807%. But this assumed perfect order execution and no management fees. Which couldn’t be reproduced in reality. Interestingly enough the best period for CBOE buy write index was 1992-1994, a slow market creeping up without any significant pull backs. So yes this is basically the one type of market covered call etfs could outperform in. It’s actually pretty rare you get flattish market conditions. Its usually a choppy market with big up moves and big down moves which covered call etfs do not thrive in. This is actually why they have performed so poorly post 2009 but did better in the 1990s during the 2000 bubble.
@@balancesheetsmatter Not mostly a raging bull market? Just look at the chart, with the exception of 2008-2009 that period was almost straight up, one of the most bullish periods in market history. Not exactly optimum for covered call ETFs but perfect for the major indexes hence your backtest results. Covered call ETFs have actually performed as they are designed, to generate consistent outsized distributions sacrificing price appreciation. By the way, typically index based covered call ETFs outperform their index during bear markets based on total return, that is because of the call premiums collected. But the biggest issue with your alternative buy the index and draw down the account method is that it runs the very real risk of a retiree outliving their money. It is fine during extreme bull markets like we have had the past 20 years or so but what happens during the inevitable bear market like the 60-90% decline many are predicting we are in the middle of right now. With a covered call ETF you will still be collecting dividends even if they will be smaller and you can wait for the market to recover. With your strategy once the money is used up you are screwed.
Well 1943-1968 could be considered a raging bull market as well 1975-2000. What we have now is not to unusual. It is true during a bad market like the 1970s owing etfs and selling shares will do poorly but covered call ETF will underperform if these is large market swings so it really wouldn’t be a solution either.
Great video. If you had 10 years until retirement (age 55) and your Roths are maxed out, what would be your portfolio allocation for a hypothetical $250k taxable account? And what would you allocate in your Roth with hypothetical $250k balance?
If I didn’t want to actively manage my portfolio I would buy $VOO and/or $VIG for both a ROTH and taxable account. $VIG is slightly geared towards dividend growth but pretty much has the same long term capital appreciation of $VOO. It’s todays day and age capital is more often returned to investors by companies through share buybacks since they are more tax efficient. So that is why I would focus on just capital appreciation in a S&P500 style etf. It’s tough to make a stable retirement income since fixed income is so low it can’t provide enough yield to live on. Also buying bond ETFs when yields are low can be risky since they can drop a lot if yields rise. But with 10 years just continuing to dollar cost average into the S&P500 would build up a nice sized retirement account and could also weather a bad bear market if it hit.
Morningstar recently published an article or two about creating tax efficient portfolio for a taxable account. If you cannot put aside any more into tax advantaged accounts, that may be your best bet. Especially when you consider there are no restrictions on a taxable account - put in as much as you want, take it out whenever you want, etc.
Just get 400 or 500 shares and discontinue the DRIP as needed / If needed in retirement ! Home paid off new car.with 0 miles (might be your last car) afford property taxes visit your grand kids , Pray to God almighty and leave your brokerage to you kids ...and wife if you have one ! Good luck bro 💘
What logic are you using that the portfolio drops %70? If Qyld drop 70% so did the nasdaq so what difference does it make? That's why you average down. How are you outperforming in a bear market? Your portfolio dives and you take some out as income? Bad move. Sideways market is essentially the best bet for Covered calls. No ups or downs just income. Your regurgitating the same nonsense every other RUclips hater has said already.
Yes both would drop 70%, the Nasdaq 100 would recover where QYLD would not. Even in a overall bull market in the last 10 year QYLD is making lower highs since inception. You miss out on the recovery with covered call etfs as I explained. So while it may take a few years to recover QQQ would eventually get back to the ath where QYLD would still be significantly down. Selling shares is not ideal in the bear market. As the backtest shows it’s still ends up being a better strategy then covered call etfs. I’m not saying this is the best overall strategy, just better then covered call etfs. Yes in an idealized sideways market a covered call etf could hypothetically outperform, to bad all real world examples they have underperformed over any reasonable period of time.
@@balancesheetsmatter @Balance Sheets Matter this is a silly if you can't follow simple charts. QYLD DOES NOT FALL 1 for 1 with the NASDAQ and it has also RECOVERED after sharp dips in the market. If it doesn't recover that means the market isn't recovering as well.
@@burneraccount9956 the back tests don’t lie. Look at after the covid crash, QQQ rallied 140%+, QYLD rallied around 30% and never made it back to the previous high, so I would call this not recovering. Right now both QQQ and QYLD are down about 33%( not exactly 1:1 ) sure you’ve gotten your “dividends” but I will make the obvious prediction QYLD will never reach its previous high again and QQQ will make major new all time highs in time. Seems like your the one who can’t look at basic charts 😂
Are there any tools that could simulate the long term value if active managed jepi and jepq were created 20yrs ago and followed the same trend as they have since inception?
if you had two ETF's, one a covered call ETF like DIVO or JEPI that for the sake of argument remained flat for the last 3 years but had 6% yield and the other an ETF that had no dividend and you sold 6% each year, wouldn't the end result be in favor of the covered call ETF? The none covered call ETF would have its shares reduced each year by 6% while the covered call would not have lost any valve. Also, would the non dividend ETF have some kind of reverse compound interest? Also, if for some reason your non high yield ETF that you sold 6% of its shares each year for income, after 10 years the price reversed to its original purchase price you would not be down 60% of the original shares and at the same price you paid for it. Also, as I mentioned above, I would love to know if negative compound interest is really a thing. I am not a math wiz but I can see that if the price goes up it compounds up then the opposite might be true as well? Hope my rambles make some sense, these ideas just kinda of came to me after watching a few dividend vs 4% type videos. I do not think I have yet seen one that has convinced me either way.
If you consider taxes selling shares would be better as you would pay long term capital gains vrs regular income taxes. There is no other actual difference between selling shares and receiving a dividend. A stock/etf drops by the dividend value when it’s paid. Take the example of a $100 stock paying a $10 dividend vrs selling 10% of the stock. After either you have $90 left, no difference.
@@balancesheetsmatter and then the Div stock recovers and you get the next Div. If you do Luda non Div stock you have just lost the current value, paid cap gains, and lost the future potential of any further gains.
I hope you read this. It is wrong that the dividend goes down when QYLD is down. The dividend per share remains the same. The capital gain or loss will alter. I wonder what is your background.
The dividend “yield” remains relatively constant if that’s what your referring to but your actual payout which I’m describing goes down. A 12% yield on $100 is a lot more then a 12% yield on $30. For example in this current market QYLD paid a 22.5 cent dividend last November and its last payout in September only was 16.5 cents. So a fairly large divided drop proportionally inline with the decline of the stock price.
I'm 63 and own RYLD, NUSI, JEPI, DIVO. I understand what you are saying but where do I put my money SCHD. Then sell X amount of shares every year. You would have to have millions to put your money in dividend paying ETF paying on 2-3% yield to have enough money to live on. I do want to dump NUSI but I'm trying to panic sell.
If I dont end up buying a any covered call ETF's, what I would do is buy more SCHD and take the 4% (3.33%) and also sell 4% of the shares for a total of 8% yearly. That way, during a really bad market downturn like we have now, I would only take out the dividend income and not sell shares in a down market. Worst that would happen is I would have 4% less income for a few months. I still have SS and pension so I would be fine.
@@slickwilly4613 I also own SCHD and have 1/3 of my money sitting in cash. I will consider putting the remainder in SCHD and CIBFX. I still going to dump NUSI if the share price gets close to $22 per share (currently at about $20). I'm trying to be patient and not panic sell at the bottom of the market. The funds are doing what I expected and generating the income in need. I do have a small pension but I delayed retiring this year. I probably won't take SS for at least 2 or 3 years. I don't think I will wait until 70. I have had a lot of close friends die early (60-62 in age). The last one wasn't even sick, saw him at church on Sunday and died Monday afternoon in the yard. The 8 year old neighbor kid found him. He went inside and ask why Mr Keith is sleeping in the yard.
I certainly do understand it can be tough to create a retirement portfolio when fixed income solutions have such low yields. It basically forces most people into more volatile investments if you don’t have millions to invest as your saying. I may make a video offering some possible ideas of how to handle this dilemma.
No even before taxes it’s still inferior to invested in covered call etfs. If you are investing in a taxable account the extra tax savings are just an extra gain you can factor in.
@@balancesheetsmatter I was not referring to taxes. I meant that If for any reason I wanted to add money back into a Roth, I could only add 7k max per year. It is a reason why I would consider high dividend over withdrawing 4%
I agree with this, regarding QYLD which is dog food and will crash and not recover. However, DIVO so far has been working remarkably better, having little downside in 2022 and yet continuing to pay the dividend. Of course, we have not yet seen all this bear market has to offer.
Unless you buy something that is actual fixed income like bonds your returns are highly linked to market fluctuations. There are blue chip dividend stocks that pay their dividends consistently with starting yields in the 2-5% range. Although there is always the risk they cut or stop their dividend. Many companies now return capital to shareholders through stock buybacks rather than dividends as it’s more tax efficient. So I would not get caught up in “passive income” vrs capitals gains. Both are gains at the end of the day. What matters is the risk/reward profile.
@@balancesheetsmatter yeah but how realistic is a dividend cut/ stop for companies that have been around for as long as say general mills or coca cola? They are too big to fail. Think of what these companies have had thrown at them up to now, I wont deny the possibility of it happening but I will bet more money on me getting struck by lightning twice in the same day then certain companies decreasing/ ending their dividend.
@@jaredbowers8938 I generally agree, there is always the risk though, it’s never 100% secure. Just a couple examples off the top of my head… 1. GE formally was considered a blue chip company with decades of dividend history cut its dividend to near nothing. 2. Disney cut its dividend so it could use those funds for reinvestment into their company.
@@balancesheetsmatter those are very prime examples, though with Disney's case it has what is in my opinion a good reason for that they just want to get their debt down after making so many acquisitions before paying dividends again. But you are right, regardless they did cut the dividend.
One thing you didn't take into consideration is that generally speaking during market volatility premiums increase, sometimes substantially. That being said, a fund that writes ATM calls on its entire portfolio will slowly decline over time. That doesn't mean that they can't be used in certain situations (I am still not a fan of the YLD's). Someone relying on them for a 30+ year retirement? Incredibly risky. Someone who has under saved and needs to build a 3-5 year bridge to get to a max SS benefit payment? Much less risky. Or someone wanting to take a year or two off from work and travel, move to part time to care for kids, etc. A use case I have also seen is using the CC etfs to extend a person's cash runway while starting a business.
Qyld doesnt write calls on their entire portfolio. This is what I hate about people who dont understand the etf. Do your diligence before you listen to this guy who writes and sells this garbage. He is getting paid to inform you about his one sided opinion, yet he doesnt know all the ins and outs about Qyld. Qyld only writes in the money calls and only on 1 percent of the portfolio per month. When they collect the premiums they pay out half the money in dividends the rest goes to buy more shares or to save in case a call is paid.
@@krakhour2 www.globalxetfs.com/content/files/Options_Strategy_Overview.pdf Straight from Global X, they write ATM calls on 100% of the portfolio monthly.
@@krakhour2 Feel free to keep spamming your nonsense but it’s obvious you don’t know what your talking about. Like you clearly have zero clue how options even work. I see you went to the QYLD holdings list and saw the NDX calls they write we’re about -1%. But let’s do some basic math here… 5745 calls contracts at 11750 NDX. Say NDX moved up 10% from that point to 12925. 5745 x 100 x 1175 = $675 million loss on a $6.75 billion fund ( if NDX was at 11750 ). 🤔 seems like options are written against 100% of the portfolio. 🤣🤣🤣 ironic
@@balancesheetsmatter You can mouth all you want but your the fool. I was around when your momma was wiping your behind. I was a key part of a physician group who traded. The problem you dont understand and will never get is the persons main goal and objective. If a person wants cash every month and its important they get that cash. They dont need you running your mouth about waiting for a growth play to get back 35 percent of capital before they can use it. Get a clue.....People need money now.....No one knows the future............
@@balancesheetsmatter We already discussed this several times. The fund sells at the money covered calls . It is a european version and is only paid out once a month in cash only. The etf will disperse part of the premiums that they collect from the contracts. In the form of a divdend. The rest of the money will be held in a special account for when cash must be paid during a time when options need to be paid. Not against the portfolio...............If you do your due diligence on QYLD you would see that they will post what they sell as far as shares. This leakage is less than 1 percent and from time to time will be replaced by capital that they hold in the special account which they collected from premuims. The excess if there is a good year will be paid out in the form of a special dividend. ( look at 2021 december payment....Awe where you think that cash came from..........
No, most ETFs just hold a basket of stocks. Covered Call ETFs use options strategies which involves selling call options against their holdings and typically have high “dividend” yields.
You know, I have always been put off by etf's not really sure why, I just think I don't understand them save face for the fact they are like gift baskets of different stocks. Maybe I just like individual stocks better. but I cant help but feel I'm closing myself off to a wide array of opportunities.
I don't agree with you on Divo, they provide both income and capital appreciation, also somewhat Jepi is somewhat the same,,, but I agree with you on xyld and qyld and ryld are trash
Divo and Jepi are certainly better as they have lower yields but they still have the same problems and will still sacrifice returns while have the same downside risk/ volatility as owning a normal etf.
Have to admit idk any of these funds or what they do but I know ALL about CCs. If you like Real Estate and the income it can provide then you should LOVE CCs. There is only one way imo to use CCs for income. It’s very simple…buy 100 shares of a great company you want to own forever, collar the 100 shares until cost basis gets low enough that puts are no longer necessary and then sell weekly 25 delta calls against those shares going forward. This will kill dividends. There are NO free lunches from the market. You must collar until stock is safely out of danger. And even then use puts around earnings. RE has costs and risks too and sometimes rental incomes must be used to buy a boiler or roof. It’s the cost of doing biz. If I had $250k I’d buy 500 shares of NVDA and protect those shares until it’s safe to play w/out put protection. Capital preservation is job # 1. It may take time to get out of the woods but I like the chance that by next year Nvda, or something else will be higher. If Nvda or others don’t rebound…we have other , bigger problems as an economy. I own 100 shares and am protected like Fort Knox. If it goes down more I will reset the position at lower cost basis. At some point AAPL NVDA etc will rebound. U gotta use a collar initially. No free lunches. That’s why banks force PMI insurance until equity reaches 20%. The collar provides same concept. Sorry so long here and ignorant of these funds but I hope I helped some CC folks. Stocks are on sale now is the time. Still use a collar bc idk if the FED actually knows what they’re doing. Aren’t they the same crew that steered us here in the first place???
I see a lot of services selling this strategy but IMO CCs have to be used wisely. I just got out of NVDA that I got into at $131.91. It's getting crushed. I got out of all positions including hedge with $180 profit. Without the collar I'd be under water. I reset around $126 but still hedged. I've made side money taking profits on both the long Put and short call. I'm guarded. No gifts to the crazy mkt. One of these days NVDA will pop. Once that happens I can cut back on the protection.
JEPI has outperformed the S&P this year homie.... might need to go back to the drawing board and back test it cause your dead wrong about JEPI at least... maybe not QYLD. your 'trust me bro' advice is trash
Compare JEPI since inception to the S&P500. m.dividendchannel.com/drip-returns-calculator/ You can pick short selective periods covered calls etf’s will outperform but as I explained in the video the heavy underperformance happens when the market rallies or has bear market rallies.
@@balancesheetsmatterWhile you maybe correct about The Global X YLD funds and other cover call funds. When it comes to JEPI you're dead wrong and apparently just don't understand the product or you didn't do any research. For one it definitely shouldn't be bunched in with that other Global X trash for multiple reasons including the fact that its the only one of these funds thats actually actively managed and its option overlay strategy uses ELNs (Equity Linked Notes) as opposed to the typical at-the money covered calls, plus they only cover 20% of the fund leaving 80% for capital appreciation. Since JEPI's inception, the S&P has outperformed by 2.37% during its short existence (2 ys and 4 months), although JEPI is outperforming The S&P by 1.66% YTD during this downturn and there is some very telling data during this short life span (which fortunately includes both a bull and a bear market with multiple large legs up and down) that shows JEPI does just as it was intended... To deliver monthly distributable income and equity market exposure with less volatility versus the S&P benchmark at a .8 beta while leaving room for capital appreciation where a higher volatility environment will allow for more potential income while lower volatility environment delivers less income.
Haha I retract my comment about your video being garbage, it is actually very helpful. However comparing covered call ETFs to the underlying stock or the S&P is missing the point Theyre not intended to perform in line with the underlying. Like I said in my initial comment the way to look at them is basically as an alternative to a corporate bond that happens to have a minimum yield but opportunity for higher yields depending on how well the company performs
Glad I may be slowly changing a few minds on covered call etfs. Although they are only comparable to their underlying stock or etf their strategy is based on. This is because you have pretty much almost the exact same downside as the underlying and they have no similarities to bonds or other fixed income instruments. Bonds whether corporate or government treasuries have guaranteed payment schedules denominated in dollars. A $100 bond offering a 5% yield will always pay $5 a year regardless if the bond goes up or down and you get the original $100 back in full when the bond matures (aside from the company going bankrupt and defaulting on the bond) unlike covered call etfs where the value goes down overtime. Covered call etfs your yield is directly linked to the value of the etf. If it's $100 and your receiving a 10% yield you get paid $10 but if it drops to $50 you get a $5, if it drops to $10 your going to get $1. Since pretty much every covered call etf pays a higher yield then the total return they produce they all experience the payments decreasing over time and your capital returned when you sell it will be lower as well. I understand there is this misconception they are similar to bonds or other fixed income instruments but this is incorrect as they do not provide "fixed" income nor have any similar characteristics to bonds.
A normal video that totaly missed the point of doing covered calls,... Covered calls are fantastic for people with a strategy. For people with dreams and bying stocks thath could rise or fall its not the place to be. This is for compounding, and you will have people winning on this but its for a specific investor. So this VID is correct in some ways. But not if your are a true income investor. Then it works
@@evopeter this isn’t about individuals doing covered calls. It’s about covered call etfs using automated strategies. I occasionally sell covered calls on stock positions I am looking for exit.
I do a little bit of covered call writing against stocks. If you time it well it can add some reasonable additional gains. I usually end up doing it on less volatile stocks that I wouldn’t mind trimming. $HUM, $K, $MRK and $CNC are some of my positions I’ve been writing covered calls against recently.
you are comparing apples to oranges. QYLD is a fixed-income instrument for current retirees. DO NOT COMPARE IT WITH EQUITIES. you are misleading the viewers.
QYLD is certainly not a fixed-income instrument, not even close. Fixed income instruments are like bonds or CDs which have “fixed” income payment over a period of time. For example $100 every month for 5 years. QYLDs dividend payments vary from month to month. You may get $100 on month then $95 then $80. And if the stock drops 50% your dividend payment may end up to be 50% less. This is basically the same as a etf or a dividend stock.
Your statements about these ETFs going down in a bear market are wrong. They’ve declined less than the market and their dividends have gone up, not down. Look at the data! Over time, it’s true they don’t outperform the market but they do provide steady income. If you’re retired, having a balanced portfolio of these funds and other dividend funds like SCHD is going to give you a better ride and a lot more peace of mind than selling shares when the value of your portfolio is down 30%. This psychological impact is what you don’t get.
As I explained at the end of the video these funds will do worse as they caps their upside during bear market rallies. So while they may have brief periods of out performance during straight down moves they underperform during the full bear market as they sacrifice the recovery every bear market rally. During a bear market you get a temporary surge of elevated volatility which increase the premium of the covered calls and your yield, but again this is short lived as when the market starts to recover volatility decreases and so will the yield. I’m not looking at short selective periods but how they perform over long cycles going through bear/ bull markets. I guess the psychological impact is personal as it would distress me not seeing my fund recover along with the market and receiving lower overall returns.
@@balancesheetsmatter thank you for the explanation. It seemed to me you were referring to the current period in the stock market. I personally prefer a balance where perhaps 70% of my return is from dividends I and 30% is from appreciation. In retirement I don’t mind getting a lower return as long as most of it is insulated from the volatility of stock prices. It would bother me more selling a stock at a 30% loss and worrying about running out of money, than making lower returns over the length of my retirement and knowing the income is there.
@@SebastienMigneault this isn’t about individuals using options, it’s about the automated strategies these covered call ETFs use and their performance.
@@balancesheetsmatter In a margin account, interest is deductible from covered call fund income, but capital gains are not (in Canada at least). When markets decline, CC funds suffer capital losses (as described in the video), in the market recovery phase the gains are offset by losses and paid out as a tax-free "return of capital". If you buy CCs with significant leverage during the recovery phase, you can make a lot of money tax-free. CC promoters emphasize the tax advantage, not the absolute performance.
YTD - Jepi (-12.99), SCHD (-15.68) VTI (-24.81) Plus Jepi starting yield is 11.49% So how is it a bad investment?
Yes Jepi has done relatively well this year but it doesn’t make sense to compare it to a S&P500, nor is it performance because of it’s covered call strategy which I am criticizing.
JEPI has a actively managed defensive fund. It is heavily weighted towards defensive stocks, if you look it’s top 10 holdings they are all up this year some with significant gains as they are defensive stocks.
A better comparison would be to compare it against a defensive fund such as XLU, XLV or XLP (utilities, healthcare, staples) all which are marginally up this year. So if you want similar defensive exposure as JEPIs stock holding provide buying these ETFs would provide better returns.
Thanks so much for this video. I haven't seen this explained to me like this before and it helped talk me out of dumping a ton of money into covered call ETFs
I agree with you about QYLD, but JEPI seems to mirror spy fairly well.
Yeah JEPI isn’t nearly as bad. It is actively managed so that should be better for covered calls then the automated atm strategy like QYLD. It has underperformed about 2% per year and is fairly new so we will see how it keeps up as it ages.
Moreover, with JEPI the percent changes in the monthly payments have not been closely correlated to percent changes in the underlying, up or down - at least so far.
Thanks and I just sold my 20 shares of QYLD and my 4 shares of RYLD. I will stick to Main Street Capital (BDC) with dividend growth of 5.61%. I am investing for retirement income and have no time to waste. Smile.
If you like BDCs, look at BIZD. It holds several BDCs inside. It's a fund of funds. But, don't let the stated expense ratio of over 10% scare you. The actual expense ratio is .4.
JEPI does well in sideway and bear markets because the covered call strategy thrives in volatile markets with a high dividend income payment , in a bull market you want growth in qqq or vti/voo. Jepi will be underperforming in a bull market and possibly provide lower income dividends. I don’t have any other covered call etf. The downside of jepi is decreased vs s&p during bear market and one still gets a fat dividend monthly. Just note that on ex dividend day, the jepi etf decreases the share price by the amount of pay out but also recovers soon after if the market goes up.
Jepi certainly is better then a lot of other CC etfs 👍. Pretty much only upwards drifting sideways markets are ideal for covered call etfs where they can outperform while making gains.
You can say because of the covered call strategy there is less downside during a bear market. But you sacrifice a lot during the recovery or during bear market rallies. And if you want to do well in a bear market investing in assets that gain is best rather then just just having a smaller drawdown.
@@balancesheetsmatter Rather than. Not rather then.
JEPI and DIVO should not be paired with the rest of them imo. QYLD is the worst.
JEPI and DIVO are certainly not as bad. Your unlikely to see them blow up but you’ll end up underperforming maybe a couple percent per year compared to buying the index and selling shares in the long run. Might not be a a lot but it does add up.
@@balancesheetsmatter Yes, but if we have a long, drawn out bear market, then these yields would be very lucrative. It serves a purpose in a portfolio.
I guess they lose less during the down moves in bear markets. But the fact is they are losing you money.
If your looking for bear market protection there are better strategies. Even during our current 2022 bear market plenty of defensive stocks have been making significant gains. I have plenty of stocks up 20-50% so those have served me a lot better then covered call etfs.
Without picking individual stocks defensive sectors like XLU and XLV would serve much better to protect a portfolio during a bear market.
Ideally during bear markets you can profit/breakeven off your defensive plays and then move that money into equities that are undervalued.
@@balancesheetsmatter Yes, they do lose you a lot less money during the bear market, and they also underperform other etfs like XLK, QQQ, SPY during a bull run. I use JEPI and JEPQ as my stable source of passive income which I further use to buy other dividend paying stocks. Most of my JEPI and JEPQ is in my roth or 401k so that makes it tax efficient as well.
What if you never sell and always reinvest your dividends? My goal is that in 20 years I will have a good amount of income every month. These are held in a roth ira.
Thanks for posting this video. It's one of the few that tells the truth of QYLD and others like it. The only way to make a covered call strategy work for steady income over the long term would be to combine it with some form of strong downside protection and then reinvest any proceeds that come from that protection. But at this point, the protection is eating into your yield so much you may as well buy something else like dividend stocks, bonds, etc.
I’m retired for 2 years now. I’m in 50% VOO, 25% JEPQ, and 25% JEPI. All my expenses are paid by distributions. I sometimes have left over distributions that get reinvested. I have yet to sell one share. I understand that doing a bucket strategy might save me on taxes and might bump up my returns a tad. I just can’t wrap my head around selling shares. I like that I have more shares than when I retired and no market timing is required.
It seems to be the physiological effect of “selling shares” that most people don’t like and is why they like covered call ETFs as there is the illusion they have the same amount of shares which is untrue.
While holding JEPQ the amount of shares you own of JEPQ may stay the same but the underlying stocks each share represents is decreasing over time. So the ETF managers as essentially doing this job for you in a incredibly inefficient manner through covered calls.
In comparison I could create a “income etf” with the sole strategy of slowly selling shares to create a similar yield and outperform all these covered call etfs… your shares you own of this ETF would stay the same but the underlying stock ownership would slowly be reducing.
@@balancesheetsmatter You make good points. I think funds like CLM and CRF absolutely sell shares of the underlying in order to pump yields. Not aware of JEPI or JEPQ doing so. I’m happy with my allocation and hope to add DIVO once I’ve reached my targeted number of JEPQ and JEPI shares.
@@balancesheetsmatter That would be great to see. I could put this fictional etf on a chart and truly compare.
Excellent points. My question is: If selling shares is a person’s retirement, what happens when he/she runs out of shares? Doesn’t their income then suddenly drop to zero? How does someone account for that?
You certainly need to take this into consideration. You should look up the 4% rule which shows historically you can sell 4% of the s&p500 index per year safely for retirement.
Obviously selling more is risky especially if there is a large long downturn in the market. If this were to happen covered call etf / or selling shares at a equivalent rate would not be safe for retirement.
Doesn't the dividend payout depends on your amount of shares and not the $ amount? And lets say if the divi cut in 50% due to a crash but that also means we are able to buy more shares and make up for the divi cut as well,right?
The “dividend” payout is a percentage of the stock price.
Yes you could buy more shares if you have the cash available to do so. Alternatively you could just buy more shares of the actual index such as the $SPY and get greater returns.
Buying and etf of the underlying index and selling shares to create needed income will always outperform covered call etfs in virtually every scenario.
At 400k you'd b looking at around 36-3800 per month with qyld
@@truckertra4489 at 400k, I don't think I'd be buying qyld. Some jepi for secondary income, but probably indexs for the rest. As much as I enjoy the funds, I don't think the entire portfolio being one is a good idea.
@@omegazeroINFI well of course never more than 1/3
Schd , schy, blv, xyld
Is working for me
@@balancesheetsmatter year to date QQQ has lost 26%, QYLD has lost 24% without dividend reinvestment. Also QYLD has been paying this whole year in option premium distributions monthly. If you buy shares at a historically low price and the share price goes up, you also get a higher option premium distribution as the percentage payout works going up, too. You can use that income short term say if you get laid off or reinvest. And you can use it to boost other investments contributions if you reach your income goals. Plus if you're old and want income that can get passed on to your decedents, this beats annuities. It has lots of uses and spreads your investments beyond just a capital appreciation alone strategy like a passive index investment.
Hello, I am just about to embark on this CC journey and found your video informative. Question if the avg yearly yield on BXMX was 6.7%, then a hypothetical 10k still made money..Not as much as the benchmark index would have yielded. Is my understanding correct? In otherwords, 10k Principal still intact plus 6.7% avg yield for 10 years. Welcome your feedback.
@@srinip825 the principle from BXMX was not intact after going though the 2009 crash. So you can get large drawdowns that don’t recover.
If you plug BXMX into a drip calculator if you reinvested all dividends you ended up with a 6.6% average yearly return but if you didn’t reinvest dividends you ended up with a 3% yearly return.
So the returns end up being pretty bad if you don’t reinvest the dividends. And if you’re reinvesting the dividends why not just buy an S&P500 index fund.
If Jepi underlying asset go up doesn’t the etf go up?
Yes but not as much because it has to sell the stocks it sold the covered calls against.
Please do your back-test for a period that includes extended flattish market conditions. Or do your back-test for a long duration bear market of over 50% and see if your strategy has any money left. A ten year back-test over a mostly raging bull market is not exactly a rigorous test, its actually the worst case scenario for CC ETFs. I think your results will be vastly different.
Kind of a rhetorical request as these types of ETFs have not have not been around in many market conditions.
Well in this video I backtested BXMX through the 2008 bear market (2004-2014). Not really a raging bull market. But pretty much the most bearish period these covered call etfs have gone through to compare against. It’s also to show they do not hold up well during significant draw downs, so in a more bearish environment both buying the index and selling shares and covered call etfs will perform like crap.
There are hypothetical backtested index’s specifically the CBOE buy/write index which from 1986-2012 outperformed the S&P500 slightly. 830% returns vrs 807%. But this assumed perfect order execution and no management fees. Which couldn’t be reproduced in reality.
Interestingly enough the best period for CBOE buy write index was 1992-1994, a slow market creeping up without any significant pull backs. So yes this is basically the one type of market covered call etfs could outperform in.
It’s actually pretty rare you get flattish market conditions. Its usually a choppy market with big up moves and big down moves which covered call etfs do not thrive in. This is actually why they have performed so poorly post 2009 but did better in the 1990s during the 2000 bubble.
@@balancesheetsmatter Not mostly a raging bull market? Just look at the chart, with the exception of 2008-2009 that period was almost straight up, one of the most bullish periods in market history. Not exactly optimum for covered call ETFs but perfect for the major indexes hence your backtest results. Covered call ETFs have actually performed as they are designed, to generate consistent outsized distributions sacrificing price appreciation.
By the way, typically index based covered call ETFs outperform their index during bear markets based on total return, that is because of the call premiums collected.
But the biggest issue with your alternative buy the index and draw down the account method is that it runs the very real risk of a retiree outliving their money. It is fine during extreme bull markets like we have had the past 20 years or so but what happens during the inevitable bear market like the 60-90% decline many are predicting we are in the middle of right now. With a covered call ETF you will still be collecting dividends even if they will be smaller and you can wait for the market to recover. With your strategy once the money is used up you are screwed.
Well 1943-1968 could be considered a raging bull market as well 1975-2000. What we have now is not to unusual.
It is true during a bad market like the 1970s owing etfs and selling shares will do poorly but covered call ETF will underperform if these is large market swings so it really wouldn’t be a solution either.
Great video. If you had 10 years until retirement (age 55) and your Roths are maxed out, what would be your portfolio allocation for a hypothetical $250k taxable account? And what would you allocate in your Roth with hypothetical $250k balance?
If I didn’t want to actively manage my portfolio I would buy $VOO and/or $VIG for both a ROTH and taxable account. $VIG is slightly geared towards dividend growth but pretty much has the same long term capital appreciation of $VOO.
It’s todays day and age capital is more often returned to investors by companies through share buybacks since they are more tax efficient. So that is why I would focus on just capital appreciation in a S&P500 style etf.
It’s tough to make a stable retirement income since fixed income is so low it can’t provide enough yield to live on. Also buying bond ETFs when yields are low can be risky since they can drop a lot if yields rise.
But with 10 years just continuing to dollar cost average into the S&P500 would build up a nice sized retirement account and could also weather a bad bear market if it hit.
Morningstar recently published an article or two about creating tax efficient portfolio for a taxable account. If you cannot put aside any more into tax advantaged accounts, that may be your best bet. Especially when you consider there are no restrictions on a taxable account - put in as much as you want, take it out whenever you want, etc.
Just get 400 or 500 shares and discontinue the DRIP as needed / If needed in retirement ! Home paid off new car.with 0 miles (might be your last car) afford property taxes visit your grand kids , Pray to God almighty and leave your brokerage to you kids ...and wife if you have one ! Good luck bro 💘
What logic are you using that the portfolio drops %70? If Qyld drop 70% so did the nasdaq so what difference does it make? That's why you average down.
How are you outperforming in a bear market? Your portfolio dives and you take some out as income? Bad move.
Sideways market is essentially the best bet for Covered calls. No ups or downs just income.
Your regurgitating the same nonsense every other RUclips hater has said already.
Yes both would drop 70%, the Nasdaq 100 would recover where QYLD would not. Even in a overall bull market in the last 10 year QYLD is making lower highs since inception.
You miss out on the recovery with covered call etfs as I explained. So while it may take a few years to recover QQQ would eventually get back to the ath where QYLD would still be significantly down.
Selling shares is not ideal in the bear market. As the backtest shows it’s still ends up being a better strategy then covered call etfs. I’m not saying this is the best overall strategy, just better then covered call etfs.
Yes in an idealized sideways market a covered call etf could hypothetically outperform, to bad all real world examples they have underperformed over any reasonable period of time.
@@balancesheetsmatter @Balance Sheets Matter this is a silly if you can't follow simple charts. QYLD DOES NOT FALL 1 for 1 with the NASDAQ and it has also RECOVERED after sharp dips in the market. If it doesn't recover that means the market isn't recovering as well.
@@burneraccount9956 the back tests don’t lie. Look at after the covid crash, QQQ rallied 140%+, QYLD rallied around 30% and never made it back to the previous high, so I would call this not recovering.
Right now both QQQ and QYLD are down about 33%( not exactly 1:1 ) sure you’ve gotten your “dividends” but I will make the obvious prediction QYLD will never reach its previous high again and QQQ will make major new all time highs in time.
Seems like your the one who can’t look at basic charts 😂
I like JEPI, JEPQ and DIVO.
Are there any tools that could simulate the long term value if active managed jepi and jepq were created 20yrs ago and followed the same trend as they have since inception?
You couldn’t really do that since they are actively managed so you wouldn’t know what stocks would be in it 10 year ago etc.
if you had two ETF's, one a covered call ETF like DIVO or JEPI that for the sake of argument remained flat for the last 3 years but had 6% yield and the other an ETF that had no dividend and you sold 6% each year, wouldn't the end result be in favor of the covered call ETF?
The none covered call ETF would have its shares reduced each year by 6% while the covered call would not have lost any valve.
Also, would the non dividend ETF have some kind of reverse compound interest?
Also, if for some reason your non high yield ETF that you sold 6% of its shares each year for income, after 10 years the price reversed to its original purchase price you would not be down 60% of the original shares and at the same price you paid for it.
Also, as I mentioned above, I would love to know if negative compound interest is really a thing. I am not a math wiz but I can see that if the price goes up it compounds up then the opposite might be true as well?
Hope my rambles make some sense, these ideas just kinda of came to me after watching a few dividend vs 4% type videos.
I do not think I have yet seen one that has convinced me either way.
If you consider taxes selling shares would be better as you would pay long term capital gains vrs regular income taxes.
There is no other actual difference between selling shares and receiving a dividend. A stock/etf drops by the dividend value when it’s paid.
Take the example of a $100 stock paying a $10 dividend vrs selling 10% of the stock. After either you have $90 left, no difference.
@@balancesheetsmatter and then the Div stock recovers and you get the next Div. If you do Luda non Div stock you have just lost the current value, paid cap gains, and lost the future potential of any further gains.
@@balancesheetsmatter use a roth
I hope you read this. It is wrong that the dividend goes down when QYLD is down. The dividend per share remains the same. The capital gain or loss will alter.
I wonder what is your background.
The dividend “yield” remains relatively constant if that’s what your referring to but your actual payout which I’m describing goes down. A 12% yield on $100 is a lot more then a 12% yield on $30.
For example in this current market QYLD paid a 22.5 cent dividend last November and its last payout in September only was 16.5 cents. So a fairly large divided drop proportionally inline with the decline of the stock price.
@@balancesheetsmatter Well explained!
Question is when do you buy the spy?
Boring conventional wisdom just says dollar cost average. For the majority of people it’s most likely the best strategy to follow.
I'm 63 and own RYLD, NUSI, JEPI, DIVO. I understand what you are saying but where do I put my money SCHD. Then sell X amount of shares every year. You would have to have millions to put your money in dividend paying ETF paying on 2-3% yield to have enough money to live on. I do want to dump NUSI but I'm trying to panic sell.
If I dont end up buying a any covered call ETF's, what I would do is buy more SCHD and take the 4% (3.33%) and also sell 4% of the shares for a total of 8% yearly. That way, during a really bad market downturn like we have now, I would only take out the dividend income and not sell shares in a down market. Worst that would happen is I would have 4% less income for a few months. I still have SS and pension so I would be fine.
@@slickwilly4613 I also own SCHD and have 1/3 of my money sitting in cash. I will consider putting the remainder in SCHD and CIBFX. I still going to dump NUSI if the share price gets close to $22 per share (currently at about $20). I'm trying to be patient and not panic sell at the bottom of the market. The funds are doing what I expected and generating the income in need. I do have a small pension but I delayed retiring this year. I probably won't take SS for at least 2 or 3 years. I don't think I will wait until 70. I have had a lot of close friends die early (60-62 in age). The last one wasn't even sick, saw him at church on Sunday and died Monday afternoon in the yard. The 8 year old neighbor kid found him. He went inside and ask why Mr Keith is sleeping in the yard.
@@michaeljones6413 oh man. I'm sorry
I certainly do understand it can be tough to create a retirement portfolio when fixed income solutions have such low yields. It basically forces most people into more volatile investments if you don’t have millions to invest as your saying.
I may make a video offering some possible ideas of how to handle this dilemma.
@@slickwilly4613 A few months? Bear markets can and have lasted years.
Does it change the equation if your in a Roth? In a Roth, if I take to much money out and want to put some back in, I am limited to 7k a yr
No even before taxes it’s still inferior to invested in covered call etfs. If you are investing in a taxable account the extra tax savings are just an extra gain you can factor in.
@@balancesheetsmatter I was not referring to taxes. I meant that If for any reason I wanted to add money back into a Roth, I could only add 7k max per year. It is a reason why I would consider high dividend over withdrawing 4%
@@slickwilly4613 No I don’t see how it would make any difference.
I agree with this, regarding QYLD which is dog food and will crash and not recover. However, DIVO so far has been working remarkably better, having little downside in 2022 and yet continuing to pay the dividend. Of course, we have not yet seen all this bear market has to offer.
What should I invest in if I want passive income not focusing primarily on gains?
Unless you buy something that is actual fixed income like bonds your returns are highly linked to market fluctuations.
There are blue chip dividend stocks that pay their dividends consistently with starting yields in the 2-5% range. Although there is always the risk they cut or stop their dividend.
Many companies now return capital to shareholders through stock buybacks rather than dividends as it’s more tax efficient.
So I would not get caught up in “passive income” vrs capitals gains. Both are gains at the end of the day. What matters is the risk/reward profile.
@@balancesheetsmatter yeah but how realistic is a dividend cut/ stop for companies that have been around for as long as say general mills or coca cola? They are too big to fail. Think of what these companies have had thrown at them up to now, I wont deny the possibility of it happening but I will bet more money on me getting struck by lightning twice in the same day then certain companies decreasing/ ending their dividend.
@@jaredbowers8938 I generally agree, there is always the risk though, it’s never 100% secure. Just a couple examples off the top of my head…
1. GE formally was considered a blue chip company with decades of dividend history cut its dividend to near nothing.
2. Disney cut its dividend so it could use those funds for reinvestment into their company.
@@balancesheetsmatter those are very prime examples, though with Disney's case it has what is in my opinion a good reason for that they just want to get their debt down after making so many acquisitions before paying dividends again. But you are right, regardless they did cut the dividend.
@@jaredbowers8938 Then and than are not the same word.
One thing you didn't take into consideration is that generally speaking during market volatility premiums increase, sometimes substantially. That being said, a fund that writes ATM calls on its entire portfolio will slowly decline over time. That doesn't mean that they can't be used in certain situations (I am still not a fan of the YLD's).
Someone relying on them for a 30+ year retirement? Incredibly risky. Someone who has under saved and needs to build a 3-5 year bridge to get to a max SS benefit payment? Much less risky. Or someone wanting to take a year or two off from work and travel, move to part time to care for kids, etc. A use case I have also seen is using the CC etfs to extend a person's cash runway while starting a business.
Qyld doesnt write calls on their entire portfolio. This is what I hate about people who dont understand the etf. Do your diligence before you listen to this guy who writes and sells this garbage. He is getting paid to inform you about his one sided opinion, yet he doesnt know all the ins and outs about Qyld. Qyld only writes in the money calls and only on 1 percent of the portfolio per month. When they collect the premiums they pay out half the money in dividends the rest goes to buy more shares or to save in case a call is paid.
@@krakhour2 www.globalxetfs.com/content/files/Options_Strategy_Overview.pdf
Straight from Global X, they write ATM calls on 100% of the portfolio monthly.
@@krakhour2 Feel free to keep spamming your nonsense but it’s obvious you don’t know what your talking about.
Like you clearly have zero clue how options even work. I see you went to the QYLD holdings list and saw the NDX calls they write we’re about -1%.
But let’s do some basic math here… 5745 calls contracts at 11750 NDX. Say NDX moved up 10% from that point to 12925.
5745 x 100 x 1175 = $675 million loss on a $6.75 billion fund ( if NDX was at 11750 ). 🤔 seems like options are written against 100% of the portfolio. 🤣🤣🤣 ironic
@@balancesheetsmatter You can mouth all you want but your the fool. I was around when your momma was wiping your behind. I was a key part of a physician group who traded. The problem you dont understand and will never get is the persons main goal and objective. If a person wants cash every month and its important they get that cash. They dont need you running your mouth about waiting for a growth play to get back 35 percent of capital before they can use it. Get a clue.....People need money now.....No one knows the future............
@@balancesheetsmatter We already discussed this several times. The fund sells at the money covered calls . It is a european version and is only paid out once a month in cash only. The etf will disperse part of the premiums that they collect from the contracts. In the form of a divdend. The rest of the money will be held in a special account for when cash must be paid during a time when options need to be paid. Not against the portfolio...............If you do your due diligence on QYLD you would see that they will post what they sell as far as shares. This leakage is less than 1 percent and from time to time will be replaced by capital that they hold in the special account which they collected from premuims. The excess if there is a good year will be paid out in the form of a special dividend. ( look at 2021 december payment....Awe where you think that cash came from..........
Combine 10% of TQQQ with JEPI to increase gains while keeping drawdowns lower than SPY.
I'm confused, are all Etf's Covered call?
No, most ETFs just hold a basket of stocks.
Covered Call ETFs use options strategies which involves selling call options against their holdings and typically have high “dividend” yields.
You know, I have always been put off by etf's not really sure why, I just think I don't understand them save face for the fact they are like gift baskets of different stocks. Maybe I just like individual stocks better. but I cant help but feel I'm closing myself off to a wide array of opportunities.
Covered call ETFs haven't been around in a bear market so you could be right.
I don't agree with you on Divo, they provide both income and capital appreciation, also somewhat Jepi is somewhat the same,,, but I agree with you on xyld and qyld and ryld are trash
Divo and Jepi are certainly better as they have lower yields but they still have the same problems and will still sacrifice returns while have the same downside risk/ volatility as owning a normal etf.
Just for clarification, $BXMX is a CEF, not an ETF. It's not a fair comparison.
It’s the only similar instrument that existed through 2008-2009. There were no equivalent etfs back then.
Have to admit idk any of these funds or what they do but I know ALL about CCs. If you like Real Estate and the income it can provide then you should LOVE CCs.
There is only one way imo to use CCs for income. It’s very simple…buy 100 shares of a great company you want to own forever, collar the 100 shares until cost basis gets low enough that puts are no longer necessary and then sell weekly 25 delta calls against those shares going forward. This will kill dividends.
There are NO free lunches from the market. You must collar until stock is safely out of danger. And even then use puts around earnings. RE has costs and risks too and sometimes rental incomes must be used to buy a boiler or roof. It’s the cost of doing biz.
If I had $250k I’d buy 500 shares of NVDA and protect those shares until it’s safe to play w/out put protection. Capital preservation is job # 1. It may take time to get out of the woods but I like the chance that by next year Nvda, or something else will be higher. If Nvda or others don’t rebound…we have other , bigger problems as an economy. I own 100 shares and am protected like Fort Knox. If it goes down more I will reset the position at lower cost basis. At some point AAPL NVDA etc will rebound. U gotta use a collar initially. No free lunches. That’s why banks force PMI insurance until equity reaches 20%. The collar provides same concept. Sorry so long here and ignorant of these funds but I hope I helped some CC folks. Stocks are on sale now is the time. Still use a collar bc idk if the FED actually knows what they’re doing. Aren’t they the same crew that steered us here in the first place???
This is great comment as a retired REA and an income producing stock investor you make a lot of sense
I am a fan of selling covered calls on individual stocks. I’m pretty selective selling them into strength to avoid getting my shares called away.
I see a lot of services selling this strategy but IMO CCs have to be used wisely. I just got out of NVDA that I got into at $131.91. It's getting crushed. I got out of all positions including hedge with $180 profit. Without the collar I'd be under water. I reset around $126 but still hedged. I've made side money taking profits on both the long Put and short call. I'm guarded. No gifts to the crazy mkt. One of these days NVDA will pop. Once that happens I can cut back on the protection.
JEPI has outperformed the S&P this year homie.... might need to go back to the drawing board and back test it cause your dead wrong about JEPI at least... maybe not QYLD. your 'trust me bro' advice is trash
Compare JEPI since inception to the S&P500.
m.dividendchannel.com/drip-returns-calculator/
You can pick short selective periods covered calls etf’s will outperform but as I explained in the video the heavy underperformance happens when the market rallies or has bear market rallies.
@@balancesheetsmatterWhile you maybe correct about The Global X YLD funds and other cover call funds. When it comes to JEPI you're dead wrong and apparently just don't understand the product or you didn't do any research. For one it definitely shouldn't be bunched in with that other Global X trash for multiple reasons including the fact that its the only one of these funds thats actually actively managed and its option overlay strategy uses ELNs (Equity Linked Notes) as opposed to the typical at-the money covered calls, plus they only cover 20% of the fund leaving 80% for capital appreciation. Since JEPI's inception, the S&P has outperformed by 2.37% during its short existence (2 ys and 4 months), although JEPI is outperforming The S&P by 1.66% YTD during this downturn and there is some very telling data during this short life span (which fortunately includes both a bull and a bear market with multiple large legs up and down) that shows JEPI does just as it was intended... To deliver monthly distributable income and equity market exposure with less volatility versus the S&P benchmark at a .8 beta while leaving room for capital appreciation where a higher volatility environment will allow for more potential income while lower volatility environment delivers less income.
Haha I retract my comment about your video being garbage, it is actually very helpful. However comparing covered call ETFs to the underlying stock or the S&P is missing the point
Theyre not intended to perform in line with the underlying. Like I said in my initial comment the way to look at them is basically as an alternative to a corporate bond that happens to have a minimum yield but opportunity for higher yields depending on how well the company performs
Glad I may be slowly changing a few minds on covered call etfs. Although they are only comparable to their underlying stock or etf their strategy is based on. This is because you have pretty much almost the exact same downside as the underlying and they have no similarities to bonds or other fixed income instruments.
Bonds whether corporate or government treasuries have guaranteed payment schedules denominated in dollars. A $100 bond offering a 5% yield will always pay $5 a year regardless if the bond goes up or down and you get the original $100 back in full when the bond matures (aside from the company going bankrupt and defaulting on the bond) unlike covered call etfs where the value goes down overtime. Covered call etfs your yield is directly linked to the value of the etf. If it's $100 and your receiving a 10% yield you get paid $10 but if it drops to $50 you get a $5, if it drops to $10 your going to get $1. Since pretty much every covered call etf pays a higher yield then the total return they produce they all experience the payments decreasing over time and your capital returned when you sell it will be lower as well.
I understand there is this misconception they are similar to bonds or other fixed income instruments but this is incorrect as they do not provide "fixed" income nor have any similar characteristics to bonds.
thank you
A normal video that totaly missed the point of doing covered calls,... Covered calls are fantastic for people with a strategy. For people with dreams and bying stocks thath could rise or fall its not the place to be. This is for compounding, and you will have people winning on this but its for a specific investor. So this VID is correct in some ways. But not if your are a true income investor. Then it works
@@evopeter this isn’t about individuals doing covered calls. It’s about covered call etfs using automated strategies.
I occasionally sell covered calls on stock positions I am looking for exit.
Big ups ..
So you don't like covered call ETFs - do you have an opinion on writing covered-calls against stocks??
I do a little bit of covered call writing against stocks. If you time it well it can add some reasonable additional gains. I usually end up doing it on less volatile stocks that I wouldn’t mind trimming.
$HUM, $K, $MRK and $CNC are some of my positions I’ve been writing covered calls against recently.
you are comparing apples to oranges. QYLD is a fixed-income instrument for current retirees. DO NOT COMPARE IT WITH EQUITIES. you are misleading the viewers.
QYLD is certainly not a fixed-income instrument, not even close.
Fixed income instruments are like bonds or CDs which have “fixed” income payment over a period of time. For example $100 every month for 5 years.
QYLDs dividend payments vary from month to month. You may get $100 on month then $95 then $80. And if the stock drops 50% your dividend payment may end up to be 50% less. This is basically the same as a etf or a dividend stock.
Your statements about these ETFs going down in a bear market are wrong. They’ve declined less than the market and their dividends have gone up, not down. Look at the data! Over time, it’s true they don’t outperform the market but they do provide steady income. If you’re retired, having a balanced portfolio of these funds and other dividend funds like SCHD is going to give you a better ride and a lot more peace of mind than selling shares when the value of your portfolio is down 30%. This psychological impact is what you don’t get.
As I explained at the end of the video these funds will do worse as they caps their upside during bear market rallies. So while they may have brief periods of out performance during straight down moves they underperform during the full bear market as they sacrifice the recovery every bear market rally.
During a bear market you get a temporary surge of elevated volatility which increase the premium of the covered calls and your yield, but again this is short lived as when the market starts to recover volatility decreases and so will the yield.
I’m not looking at short selective periods but how they perform over long cycles going through bear/ bull markets.
I guess the psychological impact is personal as it would distress me not seeing my fund recover along with the market and receiving lower overall returns.
@@balancesheetsmatter thank you for the explanation. It seemed to me you were referring to the current period in the stock market. I personally prefer a balance where perhaps 70% of my return is from dividends I and 30% is from appreciation. In retirement I don’t mind getting a lower return as long as most of it is insulated from the volatility of stock prices. It would bother me more selling a stock at a 30% loss and worrying about running out of money, than making lower returns over the length of my retirement and knowing the income is there.
The author dont know what options are. Like any tool, if you dont know how to use it, you will be desapointed.
@@SebastienMigneault this isn’t about individuals using options, it’s about the automated strategies these covered call ETFs use and their performance.
@@balancesheetsmatter In a margin account, interest is deductible from covered call fund income, but capital gains are not (in Canada at least). When markets decline, CC funds suffer capital losses (as described in the video), in the market recovery phase the gains are offset by losses and paid out as a tax-free "return of capital". If you buy CCs with significant leverage during the recovery phase, you can make a lot of money tax-free. CC promoters emphasize the tax advantage, not the absolute performance.
LoL I'm 25% CC ETFs. 🤔🙊🙉🙈