Another great interview. I really appreciate your smart questions and having Garrett give his expert opinions. This is invaluable to the retail community. Thank you.
It's impressive Garrett is willing to come on and discuss these strategies without directly promoting his own. NEOS's direct option expertise makes them stand out. I personally own $CSHI one of their Put based funds he touched upon and have been happy with it. So many of the copycat funds are derivative-based replicas of $SPY or even just the FANG stocks and don't offer any alpha because they're too formulaic. For those, you'd be better just buying $SPY itself.
Great interview, I really enjoy your channel, keep publishing more content. Been very pleased with SPYI(especially after I understood the return of capital meaning the way they use it). Having it in a taxable account instead of my IRA has been huge in the taxes not paid department. Looking forward to your next one.
I own some BCTY in Canada. It writes covered calls on a Bitcoin ETF. What I like is that they ladder the moneyness so that every month you have a couple of ITM covered calls, a few OTM, a couple near the money. It pays about 9%. It is volatile, however.
So basically, 1. Out-of-the-Money (not At-the Money) 2. Portion % coverage on portfolio (not 100%) 3. Look for Total Returns 4. Consume only a portion of distribution 70% or less and re-invest the rest 5. Expect limited capital appreciation 6. Down turn markets will limit both recovery of price and future income until NAV is recovered from point of reference 7. CC’s are dependent on the Portfolio Manager’s expertise in options! 8. CC ETF’s are better if Actively Managed vs Passively Managed
Yes, I just spent all day editing it and it drove me crazy. I have a few theories but bottom line is I'll buy a new mic before the next video. Thanks for watching (and listening) despite the sub par sound :)
In a V-shape market like in March 2020, the market tanked 40% in a month and shot back 50% in the next few months. Cover call fund suffered a great NAV erosion because it participates in 100% downside and limited upside. Even a big premium from the option will barely be enough to cover such a loss. If another V-shape market happens, QDPL will serve as a good replacement. Thanks for the Video!
You make a good point. A massive V shape plunge like that is the worst case scenario for covered call funds. QDPL is a nice blend of income and growth.
Premium cushions down side, sold calls cap up side. Sounds like less volatility overall to me. Sure its at the expense of possible total returns. One of the positive attributes of a covered call strategy is lower volatility. The strategy is not mean to make the most amount of money possible.
@12:00 The downsides that he is talking about are just part of the task and take literally a minute per week or month depending on what contract periods you are using. Those things can also be done / seen at the same time you are setting up your trade. He is acting like this is hard. Then the "paperwork" and getting everything setup is a one time thing with your broker and that only takes a few minutes.
Yes, that's the standard response from a fund manager to a beginner asking if they can DIY. I think passive funds can be replicated fairly easily DIY and there are some basic strategies you can use on single stocks that you'd be happy to own if the option trade doesn't go your way. As for active option funds, there are situations where a good option trader can adapt to market conditions (rolling calls, adjusting portfolio coverage) and deliver better results than somebody who just does a simple weekly trade.
Thanks for the suggestion. I took a quick look and didn't notice anything special about these new covered call funds that would make them more attractive than their competitors. I'll keep an eye on them to see how they perform.
Nice interview. I have 70% of my portfolio in CC ETF's/CEF's. But then I'm only a few years from retirement, so it seems reasonable. I'm always surprised how many younger investors are neck deep in CC funds when they should be focusing on total return and growth assuming they are still in the accumulation phase.
Thanks for your feedback. I agree, growth is the highest return and the most tax efficient when you're young. Then at some point when you don't want to work for money anymore...you need cashflow!
I'm fairly young but hate being at the mercy of a paycheck. I do allocate to growth but since I want to do things now I focus on cash flow.(FI without the RE in short)
@@armchairincomechanneland for some reason young people DONT want to work till their 70 like their grandparents and nobody can figure out why they don’t smh
My biggest question is how much of the base value of the equity is tied into new investors buying shares of the equity or current equity holders selling their shares?
I'm not quite sure what you mean by "equity" in this context, but a covered call ETFs price is adjusted constantly to approximately equal it's net asset value. Investors buying and sell shares doesn't affect the price of the fund, it results in the fund creating and redeeming shares. The ETF's value is determined by the value of the assets it holds. For example, SPYI holds the S&P 500 index as an asset and also sells call options. The value of the fund equates to the value of the S&P 500 index shares that it holds. The value changes based on the changes in the price of the S&P 500, along with the income it makes from selling options, less the distributions it makes from those trades. By contrast, Closed End Funds rise and fall in price based on the demand for the fund. As such, the price and net asset value move independently. www.investopedia.com/terms/e/etf.asp
Thats the question people want to know. When there is more companies all doing this will that effect the returns or cause negative issues. More AND more calls being placed , can there come a time when the broker firm set a limit or change the way they get placed which could be more risky
There will always be plenty of buys and sellers for options. If there are too many sellers then the price of the options might come down. It's a good question though....I'll keep it in mind for the next interview with Garrett. Thanks for watching!
Great video! I hope this fund has staying power. They have done well, but lack of historical data has kept me from buying a lot more. Also really hope they come out with a Nasdaq related product.
Great interview; very informative. It's awesome you can bring the fund manager himself to share his opinions from your good questions. I like hearing from someone who is as passionate about option strategies as me! While I don't hold any CC ETFs, I'm getting more interested in the concept. I would apply the DIY approach; easy to add this to my routine as I trade options everyday. I concur out of the money options are best. And manage the size (coverage) based on the underlying trend. Good he's also looking at the put side; I've been doing weekly puts on the 4 main indexes for over a year and there's plenty of opportunity. Keep the great videos coming!
Thanks for the feedback, I appreciate it! Sounds like you have the ideal personality/approach to DIY options. I might give it another try at some point in the future.
The divi was over 12% when the qqq tanked in 2022. And currently sits at 9.08% in 1 of the greatest run in history. So I’m confused with the comment about the monthly payout is inverse of the market. Personally I love/use JEPQ for 2 main reasons #1 passive income and #2 I look at it as a hedge. Guaranteed profits regardless of market conditions. I also focus on small cap growth stocks to balance out my portfolio.
Nothing has guaranteed profits but I think you made a great point. JEPQ price fell in 2022 so the distributions should have fallen (all other things being equal) because they were generated from a smaller asset base...but that didn't happen! The distributions held up well in that instance because the other factor at play was an increase in volatility, which increases option premiums. As you said, those 2 factors working in opposite directions acted as a hedge and it all worked out quite nicely. Having said that, I can't guaranty that the volatility will always generate sufficient additional income to compensate for the smaller asset base.
Hello, I just found & subscribed to your channel a few days ago and really enjoy it. I to have recently retired and plan to live at least a year if not longer on our investments. What I'm stuggling to understand is which is better, to buy nice high yield dividend ETFs or just buy the actual stock or and S&P 500 fund (or related fund). For example when I compare TSLY to TSLA using the same starting amount reinvesting the dividends in each, take $3500/month from each, TSLA wins with the largest portfolio at the end of 2023. Just trying to understand clearly why to chase the dividend instead of the growth and sell bits of each fund as needed for income. Thanks in advance!
Hi, welcome to the channel. Thanks for sharing your thoughts. I generally prefer growth for accumulating wealth while young and working because volatility doesn't matter...you have income from your job. During retirement (or just before it) when volatility does matter because you don't want to sell stocks when they're depressed, income becomes more important. I don't own any Yieldmax funds as they mostly underperform their underlying stocks, including TSLY. There are plenty of other options that pay 8-10% and offer more reliable income without asset erosion (price that trends down).
That's because the level of despair due to being in the workforce is much higher in our more mature years compared to when we were young. We wanna escape as soon as possible as we feel our fading energy levels and time running fast. ;-)
Are CC ETF's a reasonable long term investment if you're starting your portfolio with less then 50k and would contribute less then 4500 a year (i'm in my early 40's) for retirement? Will the fee's or taxes (Canada) be too much for what I contribute?
I'm not familiar with the Canadian taxation system so I can't comment on that question. If you're 20 years from retirement, then the conventional wisdom is to focus on growth stocks (SPY, QQQ etc) and gradually ease into income investing as you get closer to retirement. Covered call ETFs are mostly used by retirees because they deliver income consistently, not because they maximize the size of your portfolio.
You mentioned return of capital, and it made something come to mind. The last couple of dividends from SVOL and HIGH are listed as mostly ROC on Simplify's website. Any thoughts on that? SVOL in particular hasn't had any previous ROC dividends until last month. Might have to get the fund managers on here to explain lol. Hoping it's a change for the tax benefits.
I’ve been wondering the same thing. I couldn’t find an answer so I assume it’s destructive to NAV until proven otherwise (hopefully I’m wrong and it’s a tax treatment). The October distribution for SVOL shows no ROC which makes me think it’s not a tax treatment. I’ll reach out to them and ask.
@@armchairincomechannel Yea I’m thinking their strategy wasn’t able to make enough to cover the dividend, but I am completely open to being wrong. And last I checked the current distribution for SVOL says it’s mostly ROC similar to last month
The Oct distribution for SVOL is listed on the website as zero ROC. I'll mention this in a new video next week and when I find an answer I'll update the description of that video.
Wow, thanks for letting me know. It changed in the last day or so!!!! I took a screen shot a few days ago and October was zero ROC (one of the slides in my new SVOL video that came out a few hours ago).
Great interview. One slight annoyance about SPYI is the current distribution amount is not posted on or before the ex-date on their website. This should be a no brainer.
@armchairincomechannel, Did I understand Garrett correctly that he suggested allocating 50% of your equity portion of your portfolio to covered call etfs?
Yes. He was assuming some portion of a portfolio for fixed income (say 40%) and half of the equity portion in covered call ETFs. However, I was asking specifically for a retiree. Pre-retirement I think he would have quoted a lower figure as more growth is required.
I don't know of any pure cash securred put ETFs but NEOS offers a put spread ETF that is combined with short term treasuries. I asked Garrett why put ETFs aren't more common and he said that the premiums weren't as high (as for calls).
Good question. I'm not a tax expert and the taxation of options trading is complicated. NEOS is distributing ROC on index option trades and REX is distributing ROC on individual equities. It's early days but it appears that both of their strategies offer some tax efficiency.
Can i lose the quantities of the shares when the market keep going up ? From what i understand is u will lose shares from the covered call if market goes up. Im new to call option, it sounds like the etf will run of out shares to do covered call. I hope im wrong.
No, if the market goes up you don't lose anything. The fund holds the underlying stocks. All you "lose" is that if the fund didn't sell covered calls, the appreciation would have been even higher.
I'm talking about the shares that they use for covered call. Not the ETF shares that I own . For example they use 10000 shares of Microsoft for selling calls. If the stock price goes up so high, they have to be forced to sell. Even they buy back immediately at the higher price,one day they will run out of shares to continue doing covered call.@@armchairincomechannel
It should be important to remember a covered call is considered a bearish strategy. Or at least not super bullish. That’s another reason why I think single-stock covered call ETFs are not a good idea. They seem to be more products of design for fund managers to generate profits in management fees than good investments.
Yes, covered call strategies are not bullish and don't make sense for growth investors or investors looking to optimize for maximum returns. They're a better match for income focused investors with a more neutral outlook. I'm not a fan of single stock ETFs either.
I like short answers too. He's busy running funds valued at over $1B so I don't think he'll run for office, but he'd have my vote too :) Another interview coming later this month.
It depends on the country, and the tax treaty (if there is one). The countries with the lowest rates withhold 15%. However, if you file a tax return with the IRS as a foreigner, you will pay the ACTUAL amount due...which is usually LESS than 15% because it accounts for factors like Return of Capital and interest taxable at zero for foreigners.
Great work If you compare totat return for 2023 for JEPQ and SPYI, then JEPQ clearly outperforms. Top holdings are +- the same for the 2 ETS’s. However SPYI does outperform JEPI. So perhaps a good alternative, best of both worlds? A comparison video between the 3 would be great.
Thanks for your feedback and glad you enjoyed it. JEPQ and SPYI have a weighted overlap of 43% according to etfrc.com (entering SPY as a proxy for SPYI). JEPQ is mostly selected from the NASDAQ 100. So if the Magnificent 7 are doing well, I expect JEPQ to outperform SPYI. Thanks for the comparison suggestion!
Most covered call etfs drop in price over time. The share price drop is costing you more than the dividend you received. Buy QQQ, SMH, VUG, VOO and sell if you need the money.
You have to be careful to avoid covered call ETFs that fall in value over time. Over the past year, SPYI's share price has increased from $46.59 on January 9, 2023 to $48.25 on January 9, 2024, while paying a dividend of approx 12%...so they don't all "drop in price"! Selling funds like VOO works well when the market is up but if you need cash when the market is down (eg 2022), selling at a 20% loss is not ideal.
It's an electric mister. You fill it with water and it turns it into fine mist. There's also an LED light shining through to make it more visible. They're made in China. You should be able to find one on Amazon.
I'm not sure, but it annoyed me during the editing! I purchased a new mic system after that interview. The most recent interview has (and all future videos will have) much higher quality sound.
It's a complicated subject. They're purchased from banks and are guaranteed by the bank's credit. So they're like a hybrid of a stock and a debt instrument. Some people don't like them because they're opaque, meaning you don't get to see the trades and transaction within each ELN.
How do you only have 8k subs??? I did not want to really even consider SPYI because of NUSI....but is it because he didn't have full control of the functions of NUSI??? Cuz TBH, I really like your guest. He seems sincere and has very very good answers to all your questions...which I like, because you did NOT serve up soft balls, you asked very straightforward and tough questions. I feel very comfortable with his answers and the fund. Come on SPYI!!!!!!(but not until I build up my position!!!!). Again....how do you only have 8k subs??!!!!!!!!!!!!!!!!!!! OH, BTW....ditch the 3 boxes in your screen shot, they look comic and makes you look a little less serious/trustworthy
Thanks for your kind words and feel free to share the channel with anybody you know who's into income investing. Which "screen shot" are you referring to? The thumbnail for this interview with Garrett?
The risk is that you can cover your needs now, but after 5-10 years inflation will eat your income up and that won't grow, it will stay the same and you will loose purchasing power. You are balancing between the yield and growth of the dividends. All these covered call strategies always limit your upside and thus growth of the part of the portfolio invested in them. Its warm and nice now, but will become wet and cold after few years. Don't forget about NAV erosion too. CC meant for poor investors to create a "shortcut" for cashflow, but when the tide will go for a V shave, we will see who had not wear the panties...
If you spend all the distributions, then yes, I agree. I don't do that, I reinvest a portion of the income so that it grows continuously...faster than inflation.
I agree and it drove me crazy. After that poor sound playback, I invested in a far better quality microphone and some sound software. You should notice that my new videos have much better sound.
I think they're safe if the banks are reputable, as their credit is what's backing the note. However, its important to check which banks are issuing them instead of just trusting the fund manager's choices.
I agree. It drove me crazy. The videos after this one have improved in sound quality but I'm still not happy with it. Over the coming weeks I'll be experimenting with different microphones and a new studio. Thanks for watching and for your feedback.
Alright so lets say youve got 2 million dollars, and you put it in a bunch of 10% yielders like the ones you like. So youre making 200k a year from UTG and HIGH and MAIN etc….what is your biggest help with taxes? Youll get slapped with a $70,000 tax bill, whats the best ways to offset? And do any of your favorite funds convert to qualified dividends? I think for long term holding thats a major factor, you could save tens of thousands a year just from dividends being qualified
Hi, that's a valid question but its also quite complicated! It obviously varies based on your income situation if you're working. SPYI pays a high percentage of return of capital which is taxed as capital gains rather than ordinary income. Many of the others, as you pointed out, are ordinary income. I don't know of any way to get around a high tax bill on a $140,000 annual distribution for somebody living in the US.
@@jimfioritto4134 Right but I don't understand why they don't factor taxes into everything with money? Why not assume 50% tax rate when making decisions and not try to offset?
@@Whiskydanger I think it remains to be seen if they will steadily increase the distribution to keep pace with inflation. As for total return, same thing - yield is no assurance of total return.
Well, say you buy $5000 in this ETF. In a month, you may get a $50 payment, but the value drops by $150. So next month, you have $4850 in stock and $50 cash. So next month you get $48.5 in income and it drops $150 in value. Now you have $4700 worth of stick and $100 in your account. You always get some distributions, but a lot of these covered call ETFs are dropping in value faster than the distributions accumulate, so you're still paying taxes on income while losing money. Not how they're supposed to work, but how they have been recently.
As value goes down and NAV errodes, so too does the distribution. So there is definitely some risk of the distribution slowly going lower as well. Seems like these may good short term plays if you reinvest distributions and you actively monitor or manage risk.
That risk is real. However, your capital is at risk anytime you invest in equities. I wouldn't put all my assets into covered call index funds because they don't perform well in all market conditions (no investment does).
Qyld is a dog imho. However I was one of the earlier investors and it’s been a steady decline. Even with a roaring market environment, qyld still underperforms consistently
➡ Snowball Dividend Tracker (Create a Free Account, and the 10% Discount will appear under "Subscribe"):
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Another great interview. I really appreciate your smart questions and having Garrett give his expert opinions. This is invaluable to the retail community. Thank you.
Much appreciated! Thanks for being one of the first to watch it :)
Awesome to have an actual fund manager on the show; Garrett has some great insights.
Glad you liked it, thanks for letting me know.
You ask fantastic questions. I thank you and Garrett for this faq; I found it an excellent use of my time.
I'm glad to hear that! Thanks for letting me know.
Go to 5:45 for the biggest problem with CC ETFs.
You're right. Thanks for posting the time stamp!
If the CC ETF goes down you have to invest in the underlying.
It's impressive Garrett is willing to come on and discuss these strategies without directly promoting his own. NEOS's direct option expertise makes them stand out. I personally own $CSHI one of their Put based funds he touched upon and have been happy with it. So many of the copycat funds are derivative-based replicas of $SPY or even just the FANG stocks and don't offer any alpha because they're too formulaic. For those, you'd be better just buying $SPY itself.
Thanks for your feedback J :) Good to hear CSHI is working well for you.
Great interview, I really enjoy your channel, keep publishing more content. Been very pleased with SPYI(especially after I understood the return of capital meaning the way they use it). Having it in a taxable account instead of my IRA has been huge in the taxes not paid department. Looking forward to your next one.
Thanks for your feedback, it's very encouraging. Glad you find the videos enjoyable.
DUDE, your channel is awesome. Thanks for interviewing the NEOS rep
I appreciate that, thanks!
We do not say dude in the financial world….. kindly use Sir hereon
I own some BCTY in Canada. It writes covered calls on a Bitcoin ETF. What I like is that they ladder the moneyness so that every month you have a couple of ITM covered calls, a few OTM, a couple near the money. It pays about 9%. It is volatile, however.
Thanks for sharing. BTC funds are taking off like crazy. It will be nice to have a selection that generate income. MAXI is a US option.
So basically, 1. Out-of-the-Money (not At-the Money) 2. Portion % coverage on portfolio (not 100%) 3. Look for Total Returns 4. Consume only a portion of distribution 70% or less and re-invest the rest 5. Expect limited capital appreciation 6. Down turn markets will limit both recovery of price and future income until NAV is recovered from point of reference 7. CC’s are dependent on the Portfolio Manager’s expertise in options! 8. CC ETF’s are better if Actively Managed vs Passively Managed
Nice summary! Whether an active manager is better than a passive manager will depend on the manager.
Appreciate the honesty and straightforward answers here....
Thanks for your feedback, glad you enjoyed it :)
Is it just me or is your audio a bit stuttery in this vid? Seems your mic is clipping the audio whereas Garretts sounded fine.
Yes, I just spent all day editing it and it drove me crazy. I have a few theories but bottom line is I'll buy a new mic before the next video. Thanks for watching (and listening) despite the sub par sound :)
In a V-shape market like in March 2020, the market tanked 40% in a month and shot back 50% in the next few months. Cover call fund suffered a great NAV erosion because it participates in 100% downside and limited upside. Even a big premium from the option will barely be enough to cover such a loss. If another V-shape market happens, QDPL will serve as a good replacement.
Thanks for the Video!
You make a good point. A massive V shape plunge like that is the worst case scenario for covered call funds. QDPL is a nice blend of income and growth.
Premium cushions down side, sold calls cap up side. Sounds like less volatility overall to me. Sure its at the expense of possible total returns. One of the positive attributes of a covered call strategy is lower volatility. The strategy is not mean to make the most amount of money possible.
@12:00
The downsides that he is talking about are just part of the task and take literally a minute per week or month depending on what contract periods you are using. Those things can also be done / seen at the same time you are setting up your trade. He is acting like this is hard. Then the "paperwork" and getting everything setup is a one time thing with your broker and that only takes a few minutes.
Yes, that's the standard response from a fund manager to a beginner asking if they can DIY. I think passive funds can be replicated fairly easily DIY and there are some basic strategies you can use on single stocks that you'd be happy to own if the option trade doesn't go your way. As for active option funds, there are situations where a good option trader can adapt to market conditions (rolling calls, adjusting portfolio coverage) and deliver better results than somebody who just does a simple weekly trade.
Great interview. I liked the guy's straightforwardness.
Thanks, glad you enjoyed it.
I like Garrett’s transparency and willingness to educate, so continue to allocate to SPYI. Looking at his Nasdaq version also for post Armageddon!
He's willing to answer any question I throw at him :)
Now Goldman whats a piece of with GPIX and GPIQ. It would be great to see a review on this
Thanks for the suggestion. I took a quick look and didn't notice anything special about these new covered call funds that would make them more attractive than their competitors. I'll keep an eye on them to see how they perform.
Nice interview. I have 70% of my portfolio in CC ETF's/CEF's. But then I'm only a few years from retirement, so it seems reasonable. I'm always surprised how many younger investors are neck deep in CC funds when they should be focusing on total return and growth assuming they are still in the accumulation phase.
Thanks for your feedback. I agree, growth is the highest return and the most tax efficient when you're young. Then at some point when you don't want to work for money anymore...you need cashflow!
I'm fairly young but hate being at the mercy of a paycheck. I do allocate to growth but since I want to do things now I focus on cash flow.(FI without the RE in short)
@@armchairincomechanneland for some reason young people DONT want to work till their 70 like their grandparents and nobody can figure out why they don’t smh
@@12floit33 Yeah I agree for the most part it would take almost 2X the money to get similar results without the CC ETF payouts!!!
My biggest question is how much of the base value of the equity is tied into new investors buying shares of the equity or current equity holders selling their shares?
I'm not quite sure what you mean by "equity" in this context, but a covered call ETFs price is adjusted constantly to approximately equal it's net asset value. Investors buying and sell shares doesn't affect the price of the fund, it results in the fund creating and redeeming shares. The ETF's value is determined by the value of the assets it holds. For example, SPYI holds the S&P 500 index as an asset and also sells call options. The value of the fund equates to the value of the S&P 500 index shares that it holds. The value changes based on the changes in the price of the S&P 500, along with the income it makes from selling options, less the distributions it makes from those trades. By contrast, Closed End Funds rise and fall in price based on the demand for the fund. As such, the price and net asset value move independently. www.investopedia.com/terms/e/etf.asp
Thats the question people want to know. When there is more companies all doing this will that effect the returns or cause negative issues. More AND more calls being placed , can there come a time when the broker firm set a limit or change the way they get placed which could be more risky
There will always be plenty of buys and sellers for options. If there are too many sellers then the price of the options might come down. It's a good question though....I'll keep it in mind for the next interview with Garrett. Thanks for watching!
Great video! I hope this fund has staying power. They have done well, but lack of historical data has kept me from buying a lot more. Also really hope they come out with a Nasdaq related product.
I agree! Over time I’d like to increase my allocation as they prove themselves.
Great interview; very informative. It's awesome you can bring the fund manager himself to share his opinions from your good questions. I like hearing from someone who is as passionate about option strategies as me! While I don't hold any CC ETFs, I'm getting more interested in the concept. I would apply the DIY approach; easy to add this to my routine as I trade options everyday. I concur out of the money options are best. And manage the size (coverage) based on the underlying trend. Good he's also looking at the put side; I've been doing weekly puts on the 4 main indexes for over a year and there's plenty of opportunity. Keep the great videos coming!
Thanks for the feedback, I appreciate it! Sounds like you have the ideal personality/approach to DIY options. I might give it another try at some point in the future.
@@armchairincomechannel Many people can benefit from a dose of options in their portfolio, but you gotta love them; they need care and feeding!
The divi was over 12% when the qqq tanked in 2022. And currently sits at 9.08% in 1 of the greatest run in history. So I’m confused with the comment about the monthly payout is inverse of the market. Personally I love/use JEPQ for 2 main reasons #1 passive income and #2 I look at it as a hedge. Guaranteed profits regardless of market conditions. I also focus on small cap growth stocks to balance out my portfolio.
Nothing has guaranteed profits but I think you made a great point. JEPQ price fell in 2022 so the distributions should have fallen (all other things being equal) because they were generated from a smaller asset base...but that didn't happen! The distributions held up well in that instance because the other factor at play was an increase in volatility, which increases option premiums. As you said, those 2 factors working in opposite directions acted as a hedge and it all worked out quite nicely. Having said that, I can't guaranty that the volatility will always generate sufficient additional income to compensate for the smaller asset base.
Hello, I just found & subscribed to your channel a few days ago and really enjoy it. I to have recently retired and plan to live at least a year if not longer on our investments. What I'm stuggling to understand is which is better, to buy nice high yield dividend ETFs or just buy the actual stock or and S&P 500 fund (or related fund). For example when I compare TSLY to TSLA using the same starting amount reinvesting the dividends in each, take $3500/month from each, TSLA wins with the largest portfolio at the end of 2023. Just trying to understand clearly why to chase the dividend instead of the growth and sell bits of each fund as needed for income. Thanks in advance!
Hi, welcome to the channel. Thanks for sharing your thoughts. I generally prefer growth for accumulating wealth while young and working because volatility doesn't matter...you have income from your job. During retirement (or just before it) when volatility does matter because you don't want to sell stocks when they're depressed, income becomes more important. I don't own any Yieldmax funds as they mostly underperform their underlying stocks, including TSLY. There are plenty of other options that pay 8-10% and offer more reliable income without asset erosion (price that trends down).
Thanks for the reply, I'll look for those.
It's only late in life that I'm interested in this shit. It's rather fascinating.
That made me laugh out loud pretty hard! I'm exactly the same. When I was younger this wasn't nearly as interesting.
That's because the level of despair due to being in the workforce is much higher in our more mature years compared to when we were young. We wanna escape as soon as possible as we feel our fading energy levels and time running fast. ;-)
Thank you for all the information, I like JEPQ, because it is less volatile than QQQ.
I'm a big fan of JEPQ too. So far its performance has been excellent.
Are CC ETF's a reasonable long term investment if you're starting your portfolio with less then 50k and would contribute less then 4500 a year (i'm in my early 40's) for retirement? Will the fee's or taxes (Canada) be too much for what I contribute?
I'm not familiar with the Canadian taxation system so I can't comment on that question. If you're 20 years from retirement, then the conventional wisdom is to focus on growth stocks (SPY, QQQ etc) and gradually ease into income investing as you get closer to retirement. Covered call ETFs are mostly used by retirees because they deliver income consistently, not because they maximize the size of your portfolio.
Good questions, and answers. I appreciate what you do.
Thanks Norman :)
You mentioned return of capital, and it made something come to mind. The last couple of dividends from SVOL and HIGH are listed as mostly ROC on Simplify's website. Any thoughts on that? SVOL in particular hasn't had any previous ROC dividends until last month. Might have to get the fund managers on here to explain lol. Hoping it's a change for the tax benefits.
I’ve been wondering the same thing. I couldn’t find an answer so I assume it’s destructive to NAV until proven otherwise (hopefully I’m wrong and it’s a tax treatment). The October distribution for SVOL shows no ROC which makes me think it’s not a tax treatment. I’ll reach out to them and ask.
@@armchairincomechannel Yea I’m thinking their strategy wasn’t able to make enough to cover the dividend, but I am completely open to being wrong. And last I checked the current distribution for SVOL says it’s mostly ROC similar to last month
The Oct distribution for SVOL is listed on the website as zero ROC. I'll mention this in a new video next week and when I find an answer I'll update the description of that video.
@@armchairincomechannel Right now on their website I see the current (October) dividend listed as ROC: $0.25390 and Ordinary income: $0.04610.
Wow, thanks for letting me know. It changed in the last day or so!!!! I took a screen shot a few days ago and October was zero ROC (one of the slides in my new SVOL video that came out a few hours ago).
Great interview. One slight annoyance about SPYI is the current distribution amount is not posted on or before the ex-date on their website. This should be a no brainer.
Thanks for the feedback. Regarding the distribution amount, I'll pass on that info to them.
@armchairincomechannel, Did I understand Garrett correctly that he suggested allocating 50% of your equity portion of your portfolio to covered call etfs?
Yes. He was assuming some portion of a portfolio for fixed income (say 40%) and half of the equity portion in covered call ETFs. However, I was asking specifically for a retiree. Pre-retirement I think he would have quoted a lower figure as more growth is required.
@@armchairincomechannel Thanks for clarifying! and thank you for the effort you put into your channel content. Really great info!
Can you tell us of the cash secured put ETFs that are on the market ,thanks
I don't know of any pure cash securred put ETFs but NEOS offers a put spread ETF that is combined with short term treasuries. I asked Garrett why put ETFs aren't more common and he said that the premiums weren't as high (as for calls).
Fabulous interview!
Glad you enjoyed it, thanks for letting me know :)
Covered calls on equities or index options which are more tax beneficial i think
Good question. I'm not a tax expert and the taxation of options trading is complicated. NEOS is distributing ROC on index option trades and REX is distributing ROC on individual equities. It's early days but it appears that both of their strategies offer some tax efficiency.
DIVO is another good one... DIVO was runner up to JEPI in 2022 for ETF of the year award.
Yes, its very popular....a bit more weighted toward growth (vs income) than I'm looking for, but its total return history is impressive.
Thank you. That was very informative and interesting.
I appreciate you letting me know! Thanks for watching.
Can i lose the quantities of the shares when the market keep going up ? From what i understand is u will lose shares from the covered call if market goes up. Im new to call option, it sounds like the etf will run of out shares to do covered call. I hope im wrong.
No, if the market goes up you don't lose anything. The fund holds the underlying stocks. All you "lose" is that if the fund didn't sell covered calls, the appreciation would have been even higher.
I'm talking about the shares that they use for covered call. Not the ETF shares that I own . For example they use 10000 shares of Microsoft for selling calls. If the stock price goes up so high, they have to be forced to sell. Even they buy back immediately at the higher price,one day they will run out of shares to continue doing covered call.@@armchairincomechannel
It should be important to remember a covered call is considered a bearish strategy. Or at least not super bullish. That’s another reason why I think single-stock covered call ETFs are not a good idea. They seem to be more products of design for fund managers to generate profits in management fees than good investments.
Yes, covered call strategies are not bullish and don't make sense for growth investors or investors looking to optimize for maximum returns. They're a better match for income focused investors with a more neutral outlook. I'm not a fan of single stock ETFs either.
"So they would" A short honest answer. If he runs for president he has my vote!
I like short answers too. He's busy running funds valued at over $1B so I don't think he'll run for office, but he'd have my vote too :) Another interview coming later this month.
Great content, because I am an overseas investor i pay across the board 15% tax on all income, is that correct?.
It depends on the country, and the tax treaty (if there is one). The countries with the lowest rates withhold 15%. However, if you file a tax return with the IRS as a foreigner, you will pay the ACTUAL amount due...which is usually LESS than 15% because it accounts for factors like Return of Capital and interest taxable at zero for foreigners.
Great video! Keep up the good work
Thanks for the encouragement :)
JEPI n JEPQ, best used in traditional/Roth IRA. Or… 🤔 hmmm maybe SPY/VOO and do your own covered call?
If you enjoy researching, selling, and monitoring covered calls, it's a good strategy. I struggle to get excited about doing it.
@@armchairincomechannel
Yeah I agree, less hassle and more time to focus on other things.
Great interview. Keep up the great content.
Thanks for the feedback. I really appreciate it 😀.
My favorite channel
Wow, thanks! Very kind of you to say that.
Great work
If you compare totat return for 2023 for JEPQ and SPYI, then JEPQ clearly outperforms.
Top holdings are +- the same for the 2 ETS’s.
However SPYI does outperform JEPI.
So perhaps a good alternative, best of both worlds?
A comparison video between the 3 would be great.
Thanks for your feedback and glad you enjoyed it. JEPQ and SPYI have a weighted overlap of 43% according to etfrc.com (entering SPY as a proxy for SPYI). JEPQ is mostly selected from the NASDAQ 100. So if the Magnificent 7 are doing well, I expect JEPQ to outperform SPYI. Thanks for the comparison suggestion!
Wheel strategy ETF would be good.
I agree. Haven't seen one but it makes sense to me too.
what about FEPI, any thoughts?
I made a whole video about it. In short, so far so good….
Most covered call etfs drop in price over time. The share price drop is costing you more than the dividend you received. Buy QQQ, SMH, VUG, VOO and sell if you need the money.
You have to be careful to avoid covered call ETFs that fall in value over time. Over the past year, SPYI's share price has increased from $46.59 on January 9, 2023 to $48.25 on January 9, 2024, while paying a dividend of approx 12%...so they don't all "drop in price"!
Selling funds like VOO works well when the market is up but if you need cash when the market is down (eg 2022), selling at a 20% loss is not ideal.
What is causing the smoke in that orange dot?
It's an electric mister. You fill it with water and it turns it into fine mist. There's also an LED light shining through to make it more visible. They're made in China. You should be able to find one on Amazon.
Whats with the choppy sound?
I'm not sure, but it annoyed me during the editing! I purchased a new mic system after that interview. The most recent interview has (and all future videos will have) much higher quality sound.
Is jepi a eln?
JEPI is an ETF. Its holdings include ELN’s.
@@armchairincomechannel thank you for your response.
@@armchairincomechannel in the interview he said he doesn't like ELNs. I couldn't understand why.
It's a complicated subject. They're purchased from banks and are guaranteed by the bank's credit. So they're like a hybrid of a stock and a debt instrument. Some people don't like them because they're opaque, meaning you don't get to see the trades and transaction within each ELN.
How do you only have 8k subs??? I did not want to really even consider SPYI because of NUSI....but is it because he didn't have full control of the functions of NUSI??? Cuz TBH, I really like your guest. He seems sincere and has very very good answers to all your questions...which I like, because you did NOT serve up soft balls, you asked very straightforward and tough questions. I feel very comfortable with his answers and the fund. Come on SPYI!!!!!!(but not until I build up my position!!!!). Again....how do you only have 8k subs??!!!!!!!!!!!!!!!!!!! OH, BTW....ditch the 3 boxes in your screen shot, they look comic and makes you look a little less serious/trustworthy
Thanks for your kind words and feel free to share the channel with anybody you know who's into income investing. Which "screen shot" are you referring to? The thumbnail for this interview with Garrett?
@@armchairincomechannel Over your left shoulder. Maybe the 3 boxes are there, but they sure look fake!! LOL
Oh, yes. Those are cardboard boxes.
The risk is that you can cover your needs now, but after 5-10 years inflation will eat your income up and that won't grow, it will stay the same and you will loose purchasing power. You are balancing between the yield and growth of the dividends. All these covered call strategies always limit your upside and thus growth of the part of the portfolio invested in them. Its warm and nice now, but will become wet and cold after few years.
Don't forget about NAV erosion too.
CC meant for poor investors to create a "shortcut" for cashflow, but when the tide will go for a V shave, we will see who had not wear the panties...
If you spend all the distributions, then yes, I agree. I don't do that, I reinvest a portion of the income so that it grows continuously...faster than inflation.
I think he called out your 8% rule and said he preferred 7 ... :)
Good catch ;)
Great program, but the audio needs some work.
I agree and it drove me crazy. After that poor sound playback, I invested in a far better quality microphone and some sound software. You should notice that my new videos have much better sound.
The real question is, when are we getting a SPYQ? 👀
Good question...I don't know, but the unofficial word is that more funds are on the horizon for NEOS in 2024...
ELNs do not seem like a sound and safe strategy.
I think they're safe if the banks are reputable, as their credit is what's backing the note. However, its important to check which banks are issuing them instead of just trusting the fund manager's choices.
They also have multiple banks involved.
@@armchairincomechannelUntil ELNs blow up, close the funds and start a new one. 😊
Very informative video but your audio is horrible. There’s a bunch of clipping in it.
I agree. It drove me crazy. The videos after this one have improved in sound quality but I'm still not happy with it. Over the coming weeks I'll be experimenting with different microphones and a new studio. Thanks for watching and for your feedback.
@@armchairincomechannel absolutely. Appreciate the response and good content. Looking forward to more videos
Alright so lets say youve got 2 million dollars, and you put it in a bunch of 10% yielders like the ones you like. So youre making 200k a year from UTG and HIGH and MAIN etc….what is your biggest help with taxes? Youll get slapped with a $70,000 tax bill, whats the best ways to offset? And do any of your favorite funds convert to qualified dividends? I think for long term holding thats a major factor, you could save tens of thousands a year just from dividends being qualified
Hi, that's a valid question but its also quite complicated! It obviously varies based on your income situation if you're working. SPYI pays a high percentage of return of capital which is taxed as capital gains rather than ordinary income. Many of the others, as you pointed out, are ordinary income. I don't know of any way to get around a high tax bill on a $140,000 annual distribution for somebody living in the US.
Taxes would be around 40k total if married filing jointly. Can use smart asset tax calculator. No FICA of course.
No different than working a 1099 job. Just make sure you keep
Some of the dividends on the side to pay the taxes.
@@jimfioritto4134 Right but I don't understand why they don't factor taxes into everything with money? Why not assume 50% tax rate when making decisions and not try to offset?
No risk as long as they pay the dividends
Risk they don’t increase the distribution, risk that the total return is inferior to the corresponding index.
So no risk. Reinvest your distribution if you want to increase your return. 12 percent return is the same as spy.
@@Whiskydanger I think it remains to be seen if they will steadily increase the distribution to keep pace with inflation. As for total return, same thing - yield is no assurance of total return.
Well, say you buy $5000 in this ETF. In a month, you may get a $50 payment, but the value drops by $150. So next month, you have $4850 in stock and $50 cash. So next month you get $48.5 in income and it drops $150 in value. Now you have $4700 worth of stick and $100 in your account.
You always get some distributions, but a lot of these covered call ETFs are dropping in value faster than the distributions accumulate, so you're still paying taxes on income while losing money.
Not how they're supposed to work, but how they have been recently.
As value goes down and NAV errodes, so too does the distribution. So there is definitely some risk of the distribution slowly going lower as well. Seems like these may good short term plays if you reinvest distributions and you actively monitor or manage risk.
Only one risk : capital loss in the medium-long term
That risk is real. However, your capital is at risk anytime you invest in equities. I wouldn't put all my assets into covered call index funds because they don't perform well in all market conditions (no investment does).
Payday tomorrow $$$ 🤑
Payday is my favorite day :)
@@armchairincomechannel100%
I’m not reinvesting till the next declaration with this bear market.
I don't blame you, its a bit choppy at the moment.
Qyld is a dog imho. However I was one of the earlier investors and it’s been a steady decline. Even with a roaring market environment, qyld still underperforms consistently
I agree. QQQI is outpacing it.
Nvdy bito qdte
I appreciate your brief list of suggestions. Straight to the point!