Latest news with #XYLD
Yahoo
06-05-2025
- Business
- Yahoo
JEPQ Joins the Big Leagues as Options Income ETFs Surge
The JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) just cracked the top 10 ETF inflows list, pulling in $5.7 billion in new money year to date. Its sister fund, the JPMorgan Equity Premium Income ETF (JEPI), has added another $3.5 billion over the same period. That's no small feat. JEPQ & JEPI Income Strategies Just three years after launching, JEPQ now manages more than $24 billion in assets. JEPI, which launched in 2020, has ballooned to nearly $39 billion. Together, the two anchor a rapidly growing category of exchange-traded funds using options overlay strategies to generate income. These strategies typically involve selling call options on top of a portfolio of stocks, a tactic known as covered call writing. In exchange for giving up some upside, the funds collect option premiums that can be distributed to investors as income. JEPI takes a slightly more complex approach, using equity-linked notes (ELNs) to replicate a covered call strategy on the S&P 500. ELNs are debt instruments whose returns are tied to the performance of an underlying strategy; in this case, an S&P 500 covered call approach. JEPI allocates up to 20% of its portfolio to ELNs, while the rest is invested in a basket of low-volatility, value-oriented U.S. stocks. ESG criteria may also play a role in stock selection. This hybrid approach has delivered stronger returns than more mechanical strategies like the one used by the Global X S&P 500 Covered Call ETF (XYLD). Since launching in 2020, JEPI has returned approximately 70%, compared to 56% for XYLD over the same period. For comparison, JEPI's performance has been in line with the iShares MSCI USA Min Vol Factor ETF (USMV) but trails the SPDR S&P 500 ETF Trust (SPY), which gained 107% in that timeframe. Lower Volatility, Higher Yields JEPI has delivered on its low-volatility promise, with a standard deviation of around 11.5% over the past year—the lowest among the ETFs mentioned. JEPQ applies the same concept to a different corner of the market, drawing most of its holdings from the Nasdaq-100. It also uses ELNs to replicate a Nasdaq-based covered call strategy, distributing the income monthly. Like JEPI, it aims to offer high yield and reduced volatility relative to its benchmark. So far, the strategy has worked. Since its 2022 launch, JEPQ has returned 44%, more than double the 20% return of the Global X Nasdaq 100 Covered Call ETF (QYLD). Still, it lags the 57% gain for the Invesco QQQ Trust (QQQ), which tracks the Nasdaq-100 without any options overlay. In terms of volatility, JEPQ lands somewhere in the middle: It posted a 17.8% standard deviation over the past year, compared to 22.8% for QQQ and 16.5% for QYLD.
Forbes
02-05-2025
- Business
- Forbes
With The ‘Trump Put' Discovered, 3 Dividend Plays Up To 11.9%
If the April lows hold, the S&P 500 will clock a 19% peak to trough drop on the tariff news. The drawdown could have been worse—if the bond market had not broken! President Trump was initially resolute in the face of a declining stock market. Wall Street was desperately, unsuccessfully searching for a 'Trump Put'—a save from the decline by the White House. Trump, however, likened the levies to a necessary remedy: Treasury Secretary Scott Bessent, meanwhile, must have silenced his phone for a few weeks while his old Wall Street contacts texted and texted (and called) and texted. Bessent emphasized the need for personal resilience: The pain soon spread to the bond market, however. Yields on the 10-year Treasury surged from below 4% to 4.5% within days. This was curious behavior for the benchmark yield given the signs of an economic slowdown. The breakdown in bonds immediately got the administration's attention. Within hours of each spike in yields, President Trump's pen was in motion—with ink quickly drying on papers that dialed back tariffs! When asked whether his actions were prompted by bonds, Trump commented: We found the Trump Put. And to Wall Street's surprise, it was not in the stock market. The Trump Put was buried in the bond market! Scott Bessent faces a financial Everest: refinancing a towering $9.2 trillion of US government debt, equivalent to reissuing one-quarter of the nation's entire mountainous debt burden within a single calendar year. If Bessent issues traditional long-term bonds, he'll drive up the long end of the curve. So, we have seen him work towards a lower 10-year yield more diligently than any Treasury Secretary in recent memory. Bessent explicitly said: This is the first time in recent memory a Treasury Secretary has called out this benchmark yield as a goal. It is a notable shift from Trump 1.0, when the president was focused on a higher stock market. Initially the tariff news brought recession fears. Investors liquidated everything in a worldwide selloff. Yet, as bond-market turmoil revealed the hidden 'Trump Put,' we contrarians focused on an intriguing middle ground between index funds and stuffing cash under mattresses: covered-call funds. These income plays sit comfortably between no-yield cash hoarding and aggressively chasing market swings. The funds deliver generous monthly dividends amidst the uncertainty. They benefit from the likelihood that the president's retreat from the bond market will ultimately be supportive of the stock market, too. Earlier this month, we added Global X S&P 500 Covered Call ETF (XYLD)—which yields more than ten times the dividend yield of the S&P 500—to our Contrarian Income Report portfolio. XYLD owns the same stocks as the benchmark index, but it also writes covered calls on the index itself. XYLD currently has written calls on SPY that expire in May. When that happens, the fund will write new calls for June—and generate more income. The income from these consistently expiring calls is the key to the XYLD's sky-high 'synthetic yield.' The fund collects premiums from option buyers immediately after it writes these calls, generating steady income for shareholders. We can think of XYLD as a savvy landlord leveraging its positions to generate extra cash. XYLD owns the underlying shares behind the S&P 500. Each month it 'rents out' these valuable holdings by writing call options, swiftly collecting lucrative premiums that fuel its hefty 11.9% dividend. (CIR subscribers who bought XYLD amid the dark shadows of bear-market fears have pocketed 6.7% returns in mere weeks—a sizzling pace that annualizes to 117%. Well done!) For 'Trump Put believers' who are looking for more ways to ride the back of the bullying bond market, here are two more covered-call funds to consider. Both of these are closed-end funds (CEFs), which means they have fixed pools of shares. As a result, CEFs often trade at discounts to their net asset values (NAVs). Both of these CEFs currently trade below their NAVs. Nuveen S&P 500 Buy-Write Income Fund (BXMX) employs a similar call writing strategy. The difference is that buying BXMX today is akin to snagging a crisp dollar bill for just 90 cents—thanks to its attractive 10% discount to its net asset value. This deal wouldn't be available in a standard ETF, but BXMX often trades at a discount during times of market unrest. The fund pays an elite 8.6% today and likely has more upside ahead. Eaton Vance Tax-Managed Global Diversified Equity (EXG) is another covered-call CEF that first-level investors foolishly fled in a panic. EXG trades at an 8% discount to its NAV and yields a nifty 9.9%. Brett Owens is Chief Investment Strategist for Contrarian Outlook. For more great income ideas, get your free copy his latest special report: How to Live off Huge Monthly Dividends (up to 8.7%) — Practically Forever. Disclosure: none
