NVDY anybody?

And?

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Are you familiar with options?

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I am. Sold about $750 worth today

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The fund does not invest directly in Nvidia stock. Need to consider the potential risks and price erosion associated with this ETF.

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I’m not familiar with this ETF. But by what you’re saying, since it doesn’t directly take long positions in NVDA, it’s writing naked calls on NVDA? Or are these short call spreads, thereby making the plays risk defined?

In the prospectus, is there any discussion of delta targets (like 10, 15 or 20) on the short side or typical expiration targets - say, initial 45DTE on entry and looking to close at 21DTE, for example?

Last question, if not already stated, what is the expense ratio?

ETA:

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Gross Expense Ratio 0.99%

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As I understand it, the objective of the fund is to seek current income by selling those calls and the second objective is to have exposure to the Nvidia stock itself.

Like most covered call ETFs, it lags behind the underlying stock, in this case, NVDA. A trade off of receiving option premiums vs. potential future gains. It limits your upside potential.

Analyst Report
NVDY seeks to provide current income and capped gains on the Nvidia stock (NVDA) through a synthetic covered call strategy, collateralized by cash and US Treasurys. The actively managed fund uses both standardized exchange traded and FLEX options.

Not sure if you can access the attached prospectus or not. Dry reading.


The Fund is an actively managed exchange-traded fund (ETF) that seeks current income while maintaining the opportunity for exposure to the share price (i.e., the price returns) of the common stock of Nvidia Corporation (NVDA), subject to a limit on potential investment gains. The Fund will seek to employ its investment strategy as it relates to NVDA regardless of whether there are periods adverse market, economic, or other conditions and will not seek to take temporary defensive positions during such periods. As further described below, the Fund uses a synthetic covered call strategy to provide income and exposure to the share price returns of NVDA, subject to a limit on potential investment gains as a result of the nature of the options strategy it employs.

Had originally watched this guy's video and thought he did a good job explaining NVDY.

Some might argue "just buy the stock".

I'm just dabbling with this one to watch how it performs. Not a huge amount proportionally.

In looking this up (the company) It seems they do this with several of the 7.

I'll be a test dummy for us LOL. Will purchase 100 shares.

If you bought NVDY sub $25, that is really good. Looks like it's heading back towards $28.00 range.

These are “very risky”, high-volatility income ETFs that track individual underlying assets, such as MSFT, NVDA, AMZN, etc.

LINK

As noted earlier, some investors buy them in tandem. If you want growth, buy NVDA, and if you want income, yes, buy NVDY. Nothing about this ETF is guaranteed in regard to its dividend - it may go to zero if there is a huge down shift and that is big risk. You need to have a very strong conviction that NVDA stock will not go down in the next 3-12 months. If NVDA goes down, NVDY will fall even harder because of NAV and synthetic positions.

Personally, I have both. This one is less than 2% of the total.

What I don't understand is that Moringstsr rates this ETF with a Risk Rating of 3 which is very conservative (like government bonds). Which is safe, this can't be correct?

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It does pay a great dividend and has taken a price hit this last week (21%).

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What I don't understand is that Moringstsr rates this ETF with a Risk Rating of 3 which is very conservative (like government bonds). Which is safe, this can't be correct?

It does pay a great dividend and has taken a price hit this last week (21%)

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I can’t explain Morningstar’s rating rationale, other than what BCreed1 stated. But again, look back at what was said by Nole Man and myself as we were discussing the basic strategy (Poor Man’s Covered Call) and how that strategy is necessarily formed: you have to establish a long call on the underlying.

Although the PMCC is risk defined (you can’t lose more than the cost of the long covered call), the loss could represent as much as 100% of that call’s purchase price if the underlying stock happens to take a massive hit from the strike the long call was established. But with a short call being sold at roughly the same time as the long call position is established, that shouldn’t be the case (not a 100% net loss anyway).

The management could roll down their long call strike closer to the “new” lower stock price and then lay on a new short call above that long call, but that would require them to take a loss on the original long and outlay new capital for a long/protective call. Plus, if IV is then higher than it was, because of violent price swings, even at the same delta as the old long call, the new one would likely be more expensive, as would the short call too (but the long call will likely be in place for a longer period of time, with that expensive entry price, than the shorter dated covered calls).

So all that to say, any sort of covered call strategy (whether synthetic or using actual shares) has the risk of net losses if the underlying suffers a big enough hit. Selling calls just softens the blow in that case. What helps this company’s strategy/liquidity is that they keep so much capital in treasury securities.

It’s not an equity that I would buy (mainly since I could employ the same strategy myself and not pay management fees), but as it involves an interesting options strategy, I do plan to track it over time. For those that do take long positions in it, I hope that it does well for you.

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There is no meat on the bones to sell calls directly on the etf.

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Well, the September 20 monthly calls at the 24 strike (23.5 delta) are going for about .88 (mid price) as of yesterday’s close. With the IV at 49.5 and IV percentile at 44%, that’s really not bad. In a perfect buy/write world: keep the call premium, get the dividend, and ya might get called away at 24… then ride away on a unicorn into a rainbow sunset.

What would keep me away from trying to do a straight buy/write on the ETF is that with the (sometimes large) dividend being paid monthly, and then the ETF share price also being influenced by the price paid for long calls written based on the (then current) NVDA share price, there would be WAY too many moving parts and variables for me - even if attempting a PMCC on NVDY, which is in itself basically relying on PMCCs on NVDA. That would be a REALLY interesting case study in an options strategy course at my next investors conference though. Maybe I can catch Seth Freudberg for dinner one evening - probably my last one with him.

Want to say that I’m really enjoying this discussion, because it’s making me think outside my normal box. Thanks guys!