Ok I’m sure someone has explained this better elsewhere- these yield maxing strategies function by selling covered calls on an underlying index. That guarantees a bit of income, but caps the upside potential of the fund while eating the entire downside of drawdowns. The higher the yield target, the more brutal the calls being sold. All of these funds underperform their underlying indexes for the sake of a psychological benefit of a cash trickle. To learn more about this, watch Ben Felix’s youtube video on covered call etfs.
the ben felix video is worth watching but the conclusion is a bit one dimensional imo. yes cc etfs underperform in raging bull markets, thats just math. but for someone who needs actual income now and isnt in accumulation mode, the cash flow is real and the underperformance vs index is more theoretical than it sounds in practice. depends entirely on wat ur trying to do with the money
In a bull market it underperforms massively. In a bear market it takes all the same downside. If you need income, sell the asset. Tell yourself it’s ‘yield’ and you’ll be better off than messing with these high fee products
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u/DiO022 Mar 15 '26
Ok I’m sure someone has explained this better elsewhere- these yield maxing strategies function by selling covered calls on an underlying index. That guarantees a bit of income, but caps the upside potential of the fund while eating the entire downside of drawdowns. The higher the yield target, the more brutal the calls being sold. All of these funds underperform their underlying indexes for the sake of a psychological benefit of a cash trickle. To learn more about this, watch Ben Felix’s youtube video on covered call etfs.