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00:00:00 – 00:05:57
The video delves into the emergence and performance of new covered call ETFs, with particular focus on TSLY (Yield Max Tesla Option Income Strategy ETF), a fund centered around Tesla. Unlike traditional ETFs such as QYLD, XYLD, Devo, and JEPI that diversify across broad market indices, TSLY employs a synthetic covered call strategy, involving options on Tesla without owning Tesla stock directly. While TSLY offers an impressive 30.44% dividend yield, it carries high downside risks and volatility due to its single-stock concentration and Tesla's intrinsic volatility, leading to substantial underperformance and a significant drawdown of 33% since inception. Furthermore, the discussion highlights TSLY's elevated annual expense ratio and declining dividend payments, reinforcing the notion that despite the allure of high yields, the ETF may be unreliable and potentially a "yield trap." The conclusion emphasizes that investments in proven, stable stocks and ETFs are a more prudent strategy.
00:00:00
In this part of the video, the focus is on the emergence of a new breed of covered call ETFs, which are different from the traditional ones like QYLD, XYLD, Devo, and JEPI that write covered calls on broad market indices. Notably, these new ETFs, such as TSLY—the Yield Max Tesla Option Income Strategy ETF—focus on a single company, in this case, Tesla. TSLY boasts an extraordinary dividend yield of 30.44%. However, this high yield prompts caution as it might be indicative of a “yield trap.”
The video explains that TSLY uses a synthetic covered call strategy, purchasing call options and selling put options on Tesla, effectively replicating ownership without holding any Tesla stocks directly. This approach is contrasted with traditional ETFs that hold a diversified set of stocks. TSLY’s strategy also involves significant allocation to treasury notes for collateral. While TSLY offers a high income, the downside risk and volatility are amplified due to its single-stock focus, particularly given Tesla’s inherent volatility. Consequently, TSLY has shown substantial underperformance, with a 33% drawdown since inception.
00:03:00
In this segment, the speaker discusses the performance and drawbacks of the TSLA covered call ETF (TSLY) compared to other covered call ETFs. They highlight that simply evaluating the share price return is insufficient because dividends contribute significantly to the returns. When considering total returns (including dividends), TSLY underperforms other funds while exhibiting higher volatility. Additionally, TSLY has a higher annual expense ratio compared to its peers, which reduces net gains over time. Despite its higher yield, TSLY’s dividend payments have significantly decreased, suggesting it’s not a reliable investment and may be a “yield trap.” The speaker concludes that focusing on proven stocks and ETFs with stable returns is a better investment strategy.