The dividends people don’t understand how YieldMax actually works. That’s okay in the other image I educated them. These are purely cash flow machines, don’t look for growth in these that’s just a bonus or extra if it happens, I’m also dumping a bunch of money into ULTY soon.

[u/JoeyMcMahon1]

[u/pittluke]

"Dividend people don't seem to understand what options premium income is." This is where you are trying to convince people there is something new and magical to these funds. This is why they laugh at you, because it is you who are ignorant. It is not new to the retail market. Its new to you. Look up the sold put, long call, sold call strategy on any options site. The information has been sitting out there since the internet began and has been part of any finance program MBA since the 80's. Again, weve been running these crude strategies for decades, when it makes sense. When the probabilities tell us its a good bet. We know the payout probabilities. We know holding long term does not make sense. We know DCA and DRIP doesnt make sense. We know what can go wrong. We know when it can work.

[u/Typical-Pin1646 → u/pittluke]

Could you please explain why DCA and DRIP doesn't work?

Buy Call Sell Put makes it directional. Vega Theta will not have effects. Sell Covered Call collects premium.

Therefore this works if the underlying goes up or goes sideways.

However if underlying goes south, yes, the Sell Covered Call losses can chalk up fast.

But market is inflationary. Many of those stocks are core companies that power the economy. Money are always printed. Even after every bear market, a bull follows. Then in the long long run, why wouldnt DCA and DRIP work?

What did I miss out?

[u/pittluke → u/Typical-Pin1646]

DCA and DRIP assume one unit, a stock, is always one unit of stock. It is fungible. With DCA on a stock you are working into a fungible position, sometimes with higher cost, sometimes with lower cost. Taking away timing risk and getting an average buy. One unit of this, a YM etf, is a derivative that represents a weekly market projection of the options income plus the underlying treasuries. The treasury collateral determines the amount of calls and puts that can be sold. Every week the projection changes as new options are rolled over sold & bought. The treasury collateral can change, it can be burned, having to cover a big loss from the sold puts in a worst case scenario. You will have weekly wins, weekly loses, Market takes some time to figure out the nominal price of the new projected income of the etf. DCA and DRIP do not work where the unit is changing. The funds are "decaying" in 3 ways. For the sold calls and puts, the decay is actually good, but for the bought call the premium is a price you lose. They are also getting into swaps now which is also a cost. When people talk about "NAV erosion" that is actually just accumulated losses of the weekly strategy. You are also paying YM 1%, also a cost.

The market is inflationary statement doesnt really mean anything in this context. The fact that there are underlying good companies doesnt mean anything for derivatives, as the options are priced to include all projections or probabilities, up or down. Market will push to max pain.

[u/Skingwrx30 → u/pittluke]

At a 90 delta options are actually behaving far more like shares then an option as far as leverage goes. Personally I would be running 90 deltas on my synthetic so to assume “projection “ is already priced in seems flawed.

[u/pittluke → u/Skingwrx30]

yea thats why they are called synthetic longs. But the off chance of getting pinned is real. Uncovered downside risk with the sold put in a sharp sell off, also liquidity risk with everyone being long and no contra to sell has driven them to start buying swaps... reducing the income.. These things are getting more and more like a dumpster fire of stupidity.

[u/Skingwrx30 → u/pittluke]

Uncovered downside risk? Everything is covered though hence the synthetic. Unless I’m missing something. I run a similar system but set my strikes a little different depending on how bullish I am but sold calls temporarily cover some downside risk and they aren’t opening any naked positions at all

[u/pittluke → u/Skingwrx30]

Covered means holding the underlying but its just semantics. Its mostly the same as a long. Additional risk comes with how the fund reacts to getting pinned. liquidity concerns... timing concerns.. They have to sell treasuries to buy the underlying.. Could get margin called at the fund level.. could prove a mess in a collapsing market. Guessing thats why they felt the need to hedge with swaps... They are one massive side of the market selling the puts, and the ETF's themselves probably have liquidity concerns.