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Covered Call ETFs (youtu.be)

submitted 1 year ago* (last edited 1 year ago) by [email protected] to c/[email protected]

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Some investors are attracted to covered call funds because of their high income yields and seemingly high risk-adjusted returns. However, the appearance of high income and high risk-adjusted returns is the result of clever financial product design, not of actual improvements to returns or risk-adjusted returns.

Let's inaugurate this community with a new video by The Ben Felix. 🥲

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[–] [email protected] 2 points 1 year ago

My opinion of covered call ETFs is that they're a good bet while markets are unstable with high volatility... It allows us to monetize people's gambling that stocks will go up/down, minimizing losses when equities fall, with the caveat that it mutes gains on the way back up.

At the beginning of the pandemic, I shifted my TFSA towards a Canadian-based covered call ETF -- and while it's been up and down, it's less dramatic than some of my other investments in my RRSP/Margin accounts. I'm waiting for interest rates to start coming back down again before shifting back to a non-covered call where I think I'll do better.

Of course, I don't have any sources on this, it's just my very newbie understanding of how it all works, and I don't have the time to read all of Ben's sources. Maybe one day I'll be rich enough to hire his firm to manage my money. ;)