One of the hottest products for retail investors the last couple of years is the single-stock option-income exchange-traded fund. While the basic idea is similar to the old and respectable covered-call writing strategy, the modern versions grabbing attention and dollars are supercharged, promising income yields of 100% or more.

The largest such fund is the Yieldmax TSLA Option Income ETF, or TSLY, which takes long and short positions in call and put options on Tesla Inc., or TSLA, shares. The fund is actively managed to have a generally long exposure to Tesla stock, to generate substantial income from net selling of options, but in return to forego some of the upside if the stock rises, while suffering increased losses if the stock goes down. While this can be a useful tool for short-term speculators, it shares with leveraged and inverse ETFs an Achilles’ heel for long-term investors.

QOSHE - The Achilles’ Heel of ETFs Promising 100% Income Yields - Aaron Brown
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The Achilles’ Heel of ETFs Promising 100% Income Yields

14 0
01.03.2024

One of the hottest products for retail investors the last couple of years is the single-stock option-income exchange-traded fund. While the basic idea is similar to the old and respectable covered-call........

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