Covered Call ETFs
Covered Call ETFs
Some investors are attracted to covered call funds because of their high income yields and seemingly high risk-adjusted returns. However, the appearance of high income and high risk-adjusted returns is the result of clever financial product design, not of actual improvements to returns or risk-adjusted returns.
Let's inaugurate this community with a new video by The Ben Felix. 🥲
Hi! Thanks for posting this. I haven't watched the video but I just had a neighbor stop by the other day ranting about how amazing these ETFs. I know nothing about them and little about trading.
So let's add the description to the comments :)
Some investors are attracted to covered call funds because of their high income yields and seemingly high risk-adjusted returns. However, the appearance of high income and high risk-adjusted returns is the result of clever financial product design, not of actual improvements to returns or risk-adjusted returns.
PS : welcome :)
Added to the body. I was gonna suggest this as a banner but I won't. 😅
Bah, let's have some fun !
My opinion of covered call ETFs is that they're a good bet while markets are unstable with high volatility... It allows us to monetize people's gambling that stocks will go up/down, minimizing losses when equities fall, with the caveat that it mutes gains on the way back up.
At the beginning of the pandemic, I shifted my TFSA towards a Canadian-based covered call ETF -- and while it's been up and down, it's less dramatic than some of my other investments in my RRSP/Margin accounts. I'm waiting for interest rates to start coming back down again before shifting back to a non-covered call where I think I'll do better.
Of course, I don't have any sources on this, it's just my very newbie understanding of how it all works, and I don't have the time to read all of Ben's sources. Maybe one day I'll be rich enough to hire his firm to manage my money. ;)