📊Case Study: Passive Income Advanced Strategy Made Simple

Dive into the world of passive income with Global X ETFs' new covered call series, a sophisticated strategy made simple for modern investors.

Aug 16, 2023

#Market Cycle and Portfolio Updates

📆23-08-15

Click here for access the Market Cycle and Alfa Hedge Portfolio II Update

#keypoints

📊Case Study:
Passive Income Advanced Strategy Made Simple
The Mechanics Behind the Strategy
Comparing Covered Call ETFs
Expert Insights and Economic Outlook
Costs and CompetitionB
📈Market Cycle Analysis DYLG 0.00%↑ QYLG 0.00%↑ JEPI 0.00%↑ JEPQ 0.00%↑
Bottom Line

🔉Case Study: Passive Income Advanced Strategy Made Simple

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The quest for passive income has led many to the doors of ETFs.

Global X ETFs, boasting $43 billion in assets across 108 ETFs, has unveiled its latest offering: the Global X Dow 30 Covered Call & Growth ETF DYLG 0.00%↑.

This fund employs the covered call writing technique, a strategy where call options on owned securities are sold, generating an additional income stream.

This approach is especially appealing to investors looking for yields beyond Treasuries, particularly as interest rate hikes begin to plateau.

The Mechanics Behind the Strategy

Covered call writing isn't just about selling call options.

It's a nuanced strategy that offers potential income while also capping potential stock gains.

The new ETF, DYLG 0.00%↑, tracks the Dow Jones Industrial Average, but with a twist.

Instead of the usual market capitalization weighting, it's weighted by stock price.

While this strategy might limit the upside of stock gains, it can offer substantial income, especially when a significant volume of options is sold.

Comparing Covered Call ETFs

The Global X Nasdaq 100 Covered Call & Growth ETF QYLG 0.00%↑ offers a glimpse into the potential of this strategy.

With a 12-month trailing yield of about 6%, it's evident that the strategy can be lucrative. Both DYLG 0.00%↑ and QYLG 0.00%↑ write call options on half of their stock holdings, striking a balance between income generation and capital appreciation.

Expert Insights and Economic Outlook

Rohan Reddy, the Director of Research at Global X ETFs, underscores the importance of a sophisticated approach to income investing.

With the Federal Reserve's rate hikes potentially nearing their end and the increasing likelihood of the economy avoiding a recession, covered call ETFs might be the answer for those seeking higher yields.

However, it's essential to remember that these ETFs, while promising, also come with the stock market's inherent volatility.

Costs and Competition

While the DYLG 0.00%↑ passive fund's strategy is promising, its expense ratio of 0.60% is a point of contention.

When compared to its actively managed counterparts like the JPMorgan Equity Premium Income ETF JEPI 0.00%↑ and the JPMorgan Nasdaq Equity Premium Income ETF JEPQ 0.00%↑, which have expense ratios of just 0.35%, it's on the pricier side.

This cost difference has played a role in the JPMorgan funds' popularity, attracting over $13 billion in inflows this year.

📈Market Cycle Analysis DYLG 0.00%↑ QYLG 0.00%↑ JEPI 0.00%↑ JEPQ 0.00%↑

The Alfa Hedge Data Analysis was developed by Zurique Capital, to identify the Markets Cycles (through ETFs) combining:
Market Cycle Phase, with this data we analyze the present situation of the Market.
Historical positive volatility (highest probability of Long-Term uptrends), with this data we analyze the past.
Reward/Risk Ratio and Expectancy ratio, with this data we analyze what to expect in the future based on statistics (not astrology or opinions).
This analysis are not investment recommendations and investors must do their own research (please read the Disclaimer section).
We invest our own money and share our Portfolio with Premium Subscribers.
Premium Subscribers have full access to our Alfa Hedge Portfolio II in a Real-Life Brokerage Account in Real Time.
Know More About Premium Subscription

* DYLG 0.00%↑ started on Aug,02, so, there is not enough data to do our analysis.

** JEPQ 0.00%↑ is also a “young” ETF, there is not enough data on our monthly time frame, so we adapted to a weekly time frame analysis.

Extra Data: Dividend Yield

DYLG 0.00%↑: n/a (also no data yet)
QYLG 0.00%↑: 5.26%
JEPI 0.00%↑: 10.06%
JEPQ 0.00%↑: 11.65%

Based on our Market Cycle analysis, we emphasize trend capturing.

High dividend assets may show weaker stats, but their relevance varies.

For investors with ample capital, a 70% income-focused portfolio is ideal, complemented by a 30% trend-following strategy.

For those still accumulating, dividends shouldn't be your main focus. There are faster growth strategies.

In case (1), JEPQ 0.00%↑ is the best alternative. in case (2) QYLG 0.00%↑ would be the better option.

However, note: neither of these two assets are in our current portfolio.

Do you want to see inside our Portfolio now?

Become a Premium Subscriber and get full access to our Alfa Hedge Portfolio II in real time.

Every business day we update the evolution of the Alfa Hedge Portfolio II.

Premium Subscribers have full access to our Alfa Hedge Portfolio II in a Real-Life Brokerage Account in Real Time.
Alfa Hedge Portfolio II

Bottom Line

The passive income landscape is evolving, with advanced strategies like covered call ETFs offering a blend of potential income and capital appreciation.

As the financial world continues to change, strategies like these, which make sophisticated approaches accessible to everyday investors, will be at the forefront.

The key lies in understanding these strategies and leveraging them effectively.

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