A Look At The Boom In Income Focused Nasdaq ETFs

seekingalpha01-24

Nasdaq 100 focused ETFs with embedded options selling strategies have grown in popularity in recent years, with the QQQY recently coming to market, joining the QYLD and JEPQ.The QYLD focuses on at-the...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2405446498?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1684131327/image_1684131327.jpg","is_english":true,"pubTime":"2024-01-24 16:11","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2405446498","market":"us","top_or_hot":-1,"title":"A Look At The Boom In Income Focused Nasdaq ETFs","media":"seekingalpha","content":"<div>\n<p>Nasdaq 100 focused ETFs with embedded options selling strategies have grown in popularity in recent years, with the QQQY recently coming to market, joining the QYLD and JEPQ.The QYLD focuses on at-the...</p>\n\n<a href=\"https://seekingalpha.com/article/4664583-a-look-at-the-boom-in-income-focused-nasdaq-etfs\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>A Look At The Boom In Income Focused Nasdaq ETFs</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nA Look At The Boom In Income Focused Nasdaq ETFs\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-01-24 16:11 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4664583-a-look-at-the-boom-in-income-focused-nasdaq-etfs><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Nasdaq 100 focused ETFs with embedded options selling strategies have grown in popularity in recent years, with the QQQY recently coming to market, joining the QYLD and JEPQ.The QYLD focuses on at-the...</p>\n\n<a href=\"https://seekingalpha.com/article/4664583-a-look-at-the-boom-in-income-focused-nasdaq-etfs\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":".IXIC","symbol_name":"NASDAQ Composite","start_time":0,"source_url":"https://seekingalpha.com/article/4664583-a-look-at-the-boom-in-income-focused-nasdaq-etfs","article_id":"2405446498","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1684131327/image_1684131327.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2405446498","pubTimestamp":1706083902,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Nasdaq 100 focused ETFs with embedded options selling strategies have grown in popularity in recent years, with the QQQY recently coming to market, joining the QYLD and JEPQ.The QYLD focuses on at-the","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{".IXIC":"NASDAQ Composite","QQQ":"纳指100ETF","QQQY":"Defiance Nasdaq 100 Enhanced Options Income ETF","QLD":"纳指两倍做多ETF","BK4585":"ETF&股票定投概念","JEPQ":"J.P. MORGAN NASDAQ EQUITY PREMIUM INCOME ETF","TQQQ":"纳指三倍做多ETF","BK4588":"碎股","BK4550":"红杉资本持仓","FDN":"First Trust Dow Jones Internet I","QID":"纳指两倍做空ETF","PSQ":"纳指反向ETF","SQQQ":"纳指三倍做空ETF","QYLD":"纳斯达克100 Covered Call ETF-Global X"},"translate_title":"关注收益型纳斯达克ETF的繁荣","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{".IXIC":1,"JEPQ":1,"QQQY":1,"QYLD":1,"FDN":0.9,"MNQmain":0.6,"NQmain":0.6,"PSQ":0.6,"QID":0.6,"QLD":0.6,"QQQ":0.6,"SQQQ":0.6,"TQQQ":0.6},"content_text":"Nasdaq 100 focused ETFs with embedded options selling strategies have grown in popularity in recent years, with the QQQY recently coming to market, joining the QYLD and JEPQ.The QYLD focuses on at-the-money options, the JEPQ writes out-of-the-money calls, and the QQQY sells daily options with zero days to expiry.These ETFs have all underperformed the Nasdaq 100 itself since inception but with reduced scope for capital gains they should outperform over the long term.In the short term, however, implied volatility seems too low for these ETFs to perform well given the risk of a melt-up or crash in tech stocks.   Andrii Yalanskyi/iStock via Getty Images ETFs with embedded options selling strategies have proliferated over the past few years, with several new funds coming onto the market attempting to generate high income by using covered call strategies. As technology stocks tend to have higher levels of implied volatility compared to the S&P500, the strategies that buy the Nasdaq 100 and sell offsetting call options have been able to offer exceptionally high yields. In this article I will take a look at the strengths and weaknesses of the main Nasdaq enhanced income ETFs on the market, before offering a note of caution about their efficacy in current market conditions.   Nomura Comparing The 3 Main Enhanced Income ETFs There is not much between the three main Nasdaq 100 enhanced income ETF. They all sacrifice upside in exchange for option income while maintaining downside risk, but some subtle differences could impact their performance under different market conditions.           QYLD JEPQ QQQY   Strategy Sells monthly ATM calls Sells monthly 2.5% OTM calls Sells daily ATM puts   Yield 11.5 9.7 20.5   Expense Ratio 0.60 0.35 0.99   Volatility 7.9 8.8 13.3   Returns since September 14 5.8 9.4 8.1   Summary High yield and low volatility but sacrifices capital gains Relatively cheap and offers some upside exposure High yield but expensive and no upside exposure /high daily downside exposure   Click to enlarge The Global X NASDAQ 100 Covered Call ETF (QYLD) was launched at the end of 2013 but assets under management only begun to rise significantly over the past few years. Its returns have lagged significantly since inceptions, generating 7.6% annual returns, 10pp less than the Nasdaq 100. The QYLD's underperformance reflects its strategy of selling monthly options that are at the money or as close as possible, which means that it barely participated in any upside in the Nasdaq 100. Almost all its returns are generated by the options premiums. The JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) has been around since May 2022 and its assets under management have ballooned since then, allowing it to overtake the QYLD. The JEPQ has outperformed the QYLD since its inception due to its strategy of writing monthly 30-delta out-of-the-money calls, whose strike prices fluctuated around a historical average of 2.5% above the index price. This enables the ETF to participate in some upside in the event of Nasdaq rallies at the expense of slightly lower option income, which explains why its dividend yield is lower. Finally, the Defiance Nasdaq 100 Enhanced Options Income ETF (QQQY), which came onto the market in September last year, does not sell calls but sells puts. It does not hold the Nasdaq 100 itself, but holds Treasuries, and sells daily options to realize rapid time decay by selling in the money puts with 0DTE (zero days to expiry). This enables the fund to generate higher yields than the QYLD and JEPQ, but like the QYLD the QQQY offers almost zero exposure to capital gains, which explains why it has underperformed the JEPQ in the recent Nasdaq 100 advance. The QQQY also has a higher expense ratio, charging 0.99% compared with 0.6% for the QYLD and 0.35% for the JEPQ. Current Conditions May Not Be Suitable For Selling Volatility The high income offered by these ETFs suggests that they will outperform the Nasdaq 100 itself over the coming years as the prospect for significant further capital gains from current valuations seems slim. However, current conditions do not seem conducive to selling volatility on tech stocks. The ideal conditions for this strategy are when implied volatility is high, offering high call option income, and markets trade sideways. During bull markets the strategy tends to underperform relative to long only as call options lose money, acting as a drag on returns. During market crashes, the steady income generated by call sales does little to offset the capital losses on underlying holdings. Currently, implied volatility levels are low, meaning that option income will be limited, while the risks of a large directional move are growing.   VXN Nasdaq 100 Implied Volatility Index (Bloomberg) On the upside, there is a growing risk that the recent break to new all time highs triggers panic buying of the kind not seen since late-1999, when the Nasdaq 100 doubled in less than 6 months from already extreme valuations to historic bubble valuations. On the downside, there is a growing risk that the Nasdaq suffers a downside reversal as it recouples with bond yields, which imply fair valuations of less than half of current levels. A permanently high plateau, as implied by options markets and Wall Street analysts seem highly unlikely. Conclusion  There has been a surge in interest in Nasdaq 100 enhanced income strategies in recent years, with QYLD, JEPQ, and QQQY representing the main ETFs. Bulls would be better off in the JEPQ as this offers greater upside potential, while those looking to maximise income would be better off in the QQQY. The current juncture seems like a bad time to own these three income based ETFs, regardless of whether you are bullish or bearish, as implied volatility seems too low relative to the risks of a sharp rise or reversal. Short sellers would be best off selling the QQQY as it offers greater exposure to daily declines due to its high are a result of shorter term option sales.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":1,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2405446498"}