~11 months. Same starting line. Total return, dividends included: VFV (plain S&P 500 - no covered calls, no leverage): +20.84% HHIS (high-yield covered call): +10.02% BIGY (leveraged covered-call “UltraYield”): -10.48% VFV pays ~1% and does nothing clever. It just holds the index. It still beat the “income” fund by 2x and the “ultra income” fund by 31 points. Covered calls sell your upside for cash today. Fine in a flat or choppy market. A bad trade when the market keeps grinding higher, which is exactly what has happened since September. Add leverage like BIGY and you amplify the downside without keeping the equivalent upside. You collected the monthly cheques. The index just ran away from you. PS: I invest mostly in covered-call ETFs. This is changing how I think about it.
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27 Comments
Andrew T@andt987 · 19d
VFV shouldn’t be compared to HHIS or BIGY as they are a concentrated selection of stocks. HYLD and USCL are the closer comparisons which have similar total returns to VFV since common inception
Positive Drift@positivedrift · 19d
HHIS was outperforming VFV until about December. Since then, the Mag 7 and crypto have underperformed the S&P 500, that is the majority of HHIS. Add leverage and you amplify the downside like you said. I think a reversion to the historical average for the Mag 7 and a crypto rally will portray a different story.
Ed @edsam · 19d
You rightly pointed out some trade-offs with cc ETFs. However, you need to look at the other alternatives. A vanity number of unrealized paper gain is easily achievable. Converting wealth into cashflow is more challenging. In a previous post, I ran Monte Carlos simulations on selling SPY above 4% SWR. Needless to say, Blossom peanut gallery did not like the post. https://www.blossomsocial.com/posts/Sell-10percent-of-SPY-every-year__POST-1762949772964-k4Raw450_S0mSh5PeO29pitte
Grimace @dsr132 · 17dEdited
Terrible comparison. $HHIS and $BIGY have less holdings and the underlying stocks matter much more in terms of performance vs $VFV . Also why those 2? Why not compare with $HYLD and you would see $HYLD and even $HDIV outperforms $VFV . It's funny when people do comparing in order to prove a point, those 2 are never mentioned. I mean all this is just cherry picking data just like I just did right now, therefore your conclusion is flawed.
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