XDTE: An Interesting Spin To Covered Call Funds

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Roundhill's XDTE ETF uses a unique 0DTE covered call strategy on the S&P 500, offering high current income with daily option premiums.The fund's weekly payouts and 25.93% distribution rate stand out, ...

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}\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\">\nXDTE: An Interesting Spin To Covered Call Funds\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-09-16 19:48 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4721307-xdte-interesting-spin-to-covered-call-funds><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Roundhill's XDTE ETF uses a unique 0DTE covered call strategy on the S&P 500, offering high current income with daily option premiums.The fund's weekly payouts and 25.93% distribution rate stand out, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4721307-xdte-interesting-spin-to-covered-call-funds\">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":"VOO","symbol_name":"Vanguard标普500ETF","start_time":0,"source_url":"https://seekingalpha.com/article/4721307-xdte-interesting-spin-to-covered-call-funds","article_id":"2467811788","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/172130079/image_172130079.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2467811788","pubTimestamp":1726487318,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Or are you better off just owning the S&P 500 outright?","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"VOO":"Vanguard标普500ETF","BK4585":"ETF&股票定投概念","BK4534":"瑞士信贷持仓","SH":"标普500反向ETF","IVV":"标普500指数ETF","SSO":"两倍做多标普500ETF","BK4559":"巴菲特持仓","SPXU":"三倍做空标普500ETF","OEF":"标普100指数ETF-iShares","BK4550":"红杉资本持仓","BK4588":"碎股","XYLD":"Global X S&P 500 Covered Call ETF","SPY":"标普500ETF",".SPX":"S&P 500 Index","OEX":"标普100","BK4581":"高盛持仓","XDTE":"Roundhill S&P 500 0DTE Covered Call Strategy ETF","FDN":"First Trust Dow Jones Internet I","BK4504":"桥水持仓","SDS":"两倍做空标普500ETF"},"translate_title":"XDTE：担保看涨期权基金的有趣转变","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"XYLD":1,"XDTE":1,"SPY":1,"VOO":0.9,"FDN":0.9,"IVV":0.6,"SSO":0.6,"SPXU":0.6,"SH":0.6,"SDS":0.6,"OEX":0.6,"OEF":0.6,".SPX":0.6,"ESmain":0.6},"content_text":"Roundhill's XDTE ETF uses a unique 0DTE covered call strategy on the S&P 500, offering high current income with daily option premiums.The fund's weekly payouts and 25.93% distribution rate stand out, but the -0.46% 30-Day SEC Yield suggests potential return of investor capital.XDTE can hedge against market volatility, but its capped upside in bullish markets and complex strategy pose risks.Despite risks, XDTE could outperform the S&P 500 in volatile markets, making it a compelling option for income-focused investors.   JLFCapture/E+ via Getty Images There are two investment themes that have dominated retail mentality. The first is extremely high yield. The second is 0 Days To Expiration Options (0DTE). Those 0DTE options have exploded in terms of popularity. Roundhill understands both of these dynamics, which is why they became first to launch a 0DTE covered call fund in the Roundhill S&P 500 0DTE Covered Call Strategy ETF (BATS:XDTE). The idea is to actively provide exposure to the S&P 500 overnight while at the same time selling out of the money 0DTE calls each morning. Covered call strategies like this have been all the rage as it juices yield. But there’s a twist here in that the fund actually does its payouts weekly. Interesting spin on things. Does it work? Or are you better off just owning the S&P 500 outright? Holdings Analysis The fund achieves its exposure through options as we can see from the top holdings. The synthetic nature of the strategy allows Roundhill to have exposure to the S&P 500 without outright holding it.   roundhillinvestments.com Peer Comparison XDTE stands out because of its 0DTE covered call approach. Other covered call ETFs exist, like the Global X S&P 500 Covered Call ETF (XYLD). But XDTE's focus on 0DTE options makes it different. Typical covered call ETFs often write monthly or weekly options, but XDTE takes a daily approach. This allows it to collect premiums more often and offer higher distribution rates. As of August 31, 2024, the fund had a distribution rate of 25.93%, which is much higher than many similar funds. However, keep in mind that the 30-Day SEC Yield is -0.46%. This suggests that the high distribution rate might not be backed by the fund's income and could include giving back some of the investors' capital. When we look at the price ratio of XDTE to the S&P 500 (SPY), we find that it’s outperformed since July. This makes sense given the volatility of stocks since then. If you believe markets will continue to be vulnerable, then XDTE becomes a good way to hedge a bit on the downside as the selling of covered calls becomes more beneficial as a buffer to losses.   stockcharts.com Pros and Cons  On the plus side, the fund gives you a unique way to earn a lot of current income. The 0DTE covered call approach lets you collect premiums often. The fund tracks the S&P 500 Index, so you can still benefit from market gains to some degree. This approach might also help protect you when markets fall. When stocks go down, the money you make from writing calls can help balance out some of the losses from your stake in the index. This could mean less ups and downs compared to investing in the S&P 500 Index. The problem? The high payout rate looks good, but it might not last forever. The negative 30-Day SEC Yield tells us that some of the money paid out might actually be investors' own cash, not real earnings. This means you could be getting part of your own investment back as \"income.\" This could affect your taxes and might shrink the fund's size over time if the investments don't grow enough to make up for it. What's more, the 0DTE strategy, while profitable, has an impact on its own set of risks. The quick time decay of 0DTE options can benefit the fund, but it also needs exact timing and execution. Another possible downside is the fund's capped upside potential in bullish markets. While the strategy gives some market exposure, the ongoing writing of call options limits the possible gains. In a fast-rising market, the fund might not do as well as a direct investment in the S&P 500 Index. Conclusion  The Roundhill S&P 500 0DTE Covered Call Strategy ETF is certainly unique, allowing for a new way to generate income in the ETF world. Its approach of writing daily covered calls on the S&P 500 Index offers a chance for high current income. However, the strategy's complexity, the chance of getting capital back in distributions, and the limiting upside in strong bull markets are things investors need to think about. I actually think the fund can do quite well relative to the broader S&P 500 in the months ahead given my own views on volatility and downside potential. Worth considering.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":0},"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":"4.29.3","shortVersion":"4.29.3","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/2467811788"}