$QQCL gets a lot of hype in the covered call ETF investing space. And I get it! The NDX (the Nasdaq 100 Index like $QQQ or $QQC ) is the best performing , WELL KNOW index in the US for tech. What I did in my most recent deep dive is compared the Nasdaq 100 against two covered call versions of the same index by cboe. The 5 year returns were TELLING .... and I mean TELLING! NDX .... +89% BXNH 50% covered .... +75% BXNT 100% covered .......... +53% That's the exact same Nasdaq 100 universe of stocks with VERY different outcomes because of selling ATM (at-the-money) monthly call options. These are not ETF's, so there was no cost drag either... I think that is the part that gets overlooked when investors see a 14.4% distribution yield.... Some think ....."Well… that looks delicious like tiramisu and I get an extra shot brandy on the side!” The Cboe indices show exactly what happens as you increase the amount of the portfolio covered by calls and sell them ATM (at-the-money) each and every month. The long term results are what the mechanics of call options should result in. So what are you really trading away to get that income? This question gets asked a lot... but never really answered concretely and definitively. And how does QQCL's 1.25x leverage AND the covered call strategy change the outcome? I dug into all of it in my latest deep dive... I broke the performance over the last 15 years using $QQCC (the non leveraged version), distributions and why they have been able to increase, the option strategy, the real costs of the ETF, leverage and what happens when the Nasdaq 100 decides to have one of its many crashes. After watching ... would you take the income … or the upside? https://youtu.be/sILOigoTS00
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11 Comments
Mr Financial@mr.financial · 5h
Let's get this discussion data driven! Here is the Index comparison I mention in the post. NDX v the 50% and 100% CC coverage. This is a repost with the correct tag.
Matt Gray@matt.41 · 5h
Personally I’d take the income at this stage. 10-20 years ago or if I planned to work that same amount of time then I want the upside.
Ed @edsam · 4h
If you don't need cash now, you should hold the underlying. Bxnh, bxy have outperformed tlt. That's why there is such a huge market for the cc ETFs.
Moe @moementumfinance · 2hEdited
Knowledge is power! Thank you @mr.financial for such an in-depth vidoe. With an index which has been quite volatile, one can see why the CC strategy can limit the upside. The low "moneyness" that you shared (first time I heard that term 😀) and the risk profile segments showing the impact of leverage on the downturn/crashes were really eye opening. 🙂 The high fees also is another major red flag. You are doing God's work. Hopefully folks can make an informed decision.🙏🏻
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