- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
Tell me why this strategy is stupid
Posted on 3/21/26 at 3:08 pm
Posted on 3/21/26 at 3:08 pm
Looking for dissenting opinions on this strategy, which was spurred by the QQQI thread started here recently.
I have a decent sum of cash I was preparing to put down on a house but we decided to wait a few more years.
With a 3-4 year time horizon I was going to stash this cash in a money market or HYSA to generate a little yield while we wait.
The QQQI thread sent me on a research rabbit hole into these covered-call income etf products. I'm now thinking of pivoting away from a money market and dumping it into the likes of SPYI or similar.
Risk
Looking at several of the etfs with a longer history, with a 3 year time horizon the only 3-year period that didn't have a positive return was in the midst of the 2008 crash. The losses were meager as well (~2.5-3% annualized).
Even some of the other larger market downturns (e.g. Covid and 2022) had positive returns over a 3-year period.
Reward
From an upside standpoint, if no large market downturns, the returns have been average to phenomenal (~5-17% annualized depending on the etf). They lag the main indices during strong bull markets, but you sacrife upside for muted downside risk.
What am I not factoring in here?
I have a decent sum of cash I was preparing to put down on a house but we decided to wait a few more years.
With a 3-4 year time horizon I was going to stash this cash in a money market or HYSA to generate a little yield while we wait.
The QQQI thread sent me on a research rabbit hole into these covered-call income etf products. I'm now thinking of pivoting away from a money market and dumping it into the likes of SPYI or similar.
Risk
Looking at several of the etfs with a longer history, with a 3 year time horizon the only 3-year period that didn't have a positive return was in the midst of the 2008 crash. The losses were meager as well (~2.5-3% annualized).
Even some of the other larger market downturns (e.g. Covid and 2022) had positive returns over a 3-year period.
Reward
From an upside standpoint, if no large market downturns, the returns have been average to phenomenal (~5-17% annualized depending on the etf). They lag the main indices during strong bull markets, but you sacrife upside for muted downside risk.
What am I not factoring in here?
This post was edited on 3/21/26 at 3:08 pm
2
Posted on 3/21/26 at 3:20 pm to rintintin
It all depends on your comfort level with losing money.
Any instrument can go up or down 30-50% in a relatively short period of time.
There is no free lunch.
Money invested in the market needs TIME to compound.
Trying to beat the market with call options will probably either result in opportunity loss or real loss.
I do sell covered calls. Most expire worthless, but I got exercised out of Seagate at 125. It’s now 350 or more per share. I was in at 57 or so.
I’ve been selling calls against 1000s of VZ shares for years. It was nice to supplement the dividend. In general, it’s a lot of motion and some transaction costs for a boosted return.
I guess what I’m sharing is the positions I’ve made the most money on have been in stocks I’ve held for 25+ years through ups and downs.
Any instrument can go up or down 30-50% in a relatively short period of time.
There is no free lunch.
Money invested in the market needs TIME to compound.
Trying to beat the market with call options will probably either result in opportunity loss or real loss.
I do sell covered calls. Most expire worthless, but I got exercised out of Seagate at 125. It’s now 350 or more per share. I was in at 57 or so.
I’ve been selling calls against 1000s of VZ shares for years. It was nice to supplement the dividend. In general, it’s a lot of motion and some transaction costs for a boosted return.
I guess what I’m sharing is the positions I’ve made the most money on have been in stocks I’ve held for 25+ years through ups and downs.
Posted on 3/21/26 at 3:22 pm to rintintin
I’m sure it was mentioned in the other thread. Just chart spyi, xdte, and spy starting at liberation day. It highlights exactly how those funds react to any big swings. It took 6 months for the NAV of one of them to just recover and match the SPY recovery, while on the way down the CC funds only outperformed by about 1.5%.
You also have significant NAV decay on some of them that requires ongoing monitoring.
You also have significant NAV decay on some of them that requires ongoing monitoring.
Posted on 3/21/26 at 3:41 pm to lsuconnman
quote:
Just chart spyi, xdte, and spy starting at liberation day. It highlights exactly how those funds react to any big swings. It took 6 months for the NAV of one of them to just recover and match the SPY recovery, while on the way down the CC funds only outperformed by about 1.5%.
True, which is why I wouldn't consider this strategy on a shorter time horizon. 3 years appears to be enough time to let the dividends mute any big downturns.
Posted on 3/21/26 at 3:51 pm to rintintin
If you’re committing the money for 3+ years you’ll arguably underperform the basic index.
The people that benefit from the CC funds either need the income it generates, or they’re trying to show income to qualify for credit, or they’re using the income to pay margin costs for leverage.
The people that benefit from the CC funds either need the income it generates, or they’re trying to show income to qualify for credit, or they’re using the income to pay margin costs for leverage.
Posted on 3/21/26 at 4:13 pm to lsuconnman
quote:
If you’re committing the money for 3+ years you’ll arguably underperform the basic index
For me it's more about capital preservation with the opportunity to have a meaningful return, so I'm totally fine with that.
This post was edited on 3/21/26 at 4:14 pm
Posted on 3/21/26 at 4:36 pm to rintintin
These ETFs offer psychological feelz goods. Effectively the Ramsey effect for people who are good with money.
Against my better judgment, I have some of the funds. The distributions are comforting and provide a monthly dopamine hit…which is ultimately the tradeoff.
Against my better judgment, I have some of the funds. The distributions are comforting and provide a monthly dopamine hit…which is ultimately the tradeoff.
Posted on 3/21/26 at 5:26 pm to lsuconnman
quote:
These ETFs offer psychological feelz goods.
exactly There's certainly a level of psychological comfort with this. I'd sleep much better knowing this cash is generating monthly income and it's not 100% proportional to market downturns.
Posted on 3/21/26 at 8:40 pm to rintintin
I own SPYI, JEPQ, QDVO, XDTE, SCHD, BITO, QYLG, and XYLD. I consider myself a somewhat knowledgeable CC ETF investor. I would never put my savings in these kinds of funds. Look at the YTD returns and how long it takes for NAV to recover from a downturn. I’m snowballing these for passive income to supplement my retirement accounts, so I’m long term and can live through the swings. Short term will do little for you in this regard.
You talk like these are sure things and they are not. If you want the dopamine of weekly payouts with higher yield than a HYSA, open up a treasury account and ladder 4 or 6 week t-bills. You get money every other week and unless the government defaults, no loss of capital. And it’s not taxed by the state which your dividends will be.
But you do you.
You talk like these are sure things and they are not. If you want the dopamine of weekly payouts with higher yield than a HYSA, open up a treasury account and ladder 4 or 6 week t-bills. You get money every other week and unless the government defaults, no loss of capital. And it’s not taxed by the state which your dividends will be.
But you do you.
Posted on 3/21/26 at 9:24 pm to Suntiger
Appreciate your insight
I've run some scenarios which were highlighted in the OP but if you have any deeper research would love to see it. Based on my (admittedly quick and dirty) research, over a 3-year horizon these products absorb market downturns pretty well.
Not at all. I'm presenting a case based on some research and looking for other opinions. Again, based on some scenario testing there are certainly scenarios that result in negative returns. What I was trying to relay is that from a risk/reward standpoint these look promising for capital preservation with upside potential.
quote:
Look at the YTD returns and how long it takes for NAV to recover from a downturn.
I've run some scenarios which were highlighted in the OP but if you have any deeper research would love to see it. Based on my (admittedly quick and dirty) research, over a 3-year horizon these products absorb market downturns pretty well.
quote:
You talk like these are sure things and they are not
Not at all. I'm presenting a case based on some research and looking for other opinions. Again, based on some scenario testing there are certainly scenarios that result in negative returns. What I was trying to relay is that from a risk/reward standpoint these look promising for capital preservation with upside potential.
This post was edited on 3/21/26 at 9:31 pm
Posted on 3/21/26 at 10:17 pm to rintintin
You might want to consider BOXX or CSHI if you’re looking for an alternative to a high yield savings account investment.
Posted on 3/22/26 at 7:29 am to rintintin
Makersmark knows what’s up. If you’re willing to be engaged, you’re far better off writing calls on the aristocrats. VZ, T, MO, O, etc ….and if you want to get wild, American carmakers.
Just research their traditional dividend structure. Sell CCs, and when yield falls below the average you buy more. When it exceeds, you sell some.
Just research their traditional dividend structure. Sell CCs, and when yield falls below the average you buy more. When it exceeds, you sell some.
Page 1 of 1
Popular
Back to top
Follow TigerDroppings for LSU Football News