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ID: fln9toKD/biz/60578135#60579889
7/4/2025, 3:53:50 AM
>>60579861
So basically, since a deep ITM position is roughly equal to a long position (but with less upfront capital), they use that as a cover for writing the CCs in the first place, which is a fairly common way to do it. One interesting thing to note is that since it's an index they're trading against, there's no early assignment risk (eg, it's cash-settled).
The most relevant part is "QDTE offers weekly income but sacrifices a portion of capital appreciation", which is the risk of CCs in the first place; you cap your upside and potentially miss out on the gains that matter. Compare the chart of QDTE to SPY, you can see they roughly inverse on the weekly chart (likely due to dividends)
My thought is that it might be worth holding it in a bear market. I notice the fund is fairly new, about a year or so. Given how it started off expensive and trends down over time, it looks similar to those leveraged/commodity/forex etfs that shred value over time. As noted here, a low volatility environment is bad for the fund (eg bull markets).
Like those other etfs, I expect it'll stay around for a while until a major black swan event bankrupts it... since it's not leveraged, it should be fine. I'd expect it to trend down over time, so you might have to reinvest the dividend back into it, and expect reverse splits over time
So basically, since a deep ITM position is roughly equal to a long position (but with less upfront capital), they use that as a cover for writing the CCs in the first place, which is a fairly common way to do it. One interesting thing to note is that since it's an index they're trading against, there's no early assignment risk (eg, it's cash-settled).
The most relevant part is "QDTE offers weekly income but sacrifices a portion of capital appreciation", which is the risk of CCs in the first place; you cap your upside and potentially miss out on the gains that matter. Compare the chart of QDTE to SPY, you can see they roughly inverse on the weekly chart (likely due to dividends)
My thought is that it might be worth holding it in a bear market. I notice the fund is fairly new, about a year or so. Given how it started off expensive and trends down over time, it looks similar to those leveraged/commodity/forex etfs that shred value over time. As noted here, a low volatility environment is bad for the fund (eg bull markets).
Like those other etfs, I expect it'll stay around for a while until a major black swan event bankrupts it... since it's not leveraged, it should be fine. I'd expect it to trend down over time, so you might have to reinvest the dividend back into it, and expect reverse splits over time
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