SPYI, JEPQ
The post on SPYI and JEPQ should be helpful for hedging as protection from the downside, instead of purely buying the SOXX. The JEPQ would have more correlation with the SOXX given its Nasdaq 100 base. I’m going to look around to see if there is an income yielding ETF following the SOXX.
The other form of hedging I’ve been constantly advising is profit booking and in the last 3-4 weeks I have trimmed positions in several of the semis and other tech stocks that I had recommended, (they were posted as trade alerts and are part of the recommendation file) especially since they passed targets, that is a consistent theme.
SPYI and JEPQ
SPYI is more diversified, tracks the S&P 500, while the JEPQ tracks the QQQ (Nasdaq 100)
How does it make income streams to give you monthly yields? It sells covered calls, and earns premiums on the calls from option traders. It owns the stocks to make the covered calls so it will move in sync with the market, but the advantage is that it will earn premiums, which it will distribute to you.
Therefore, there are limited upsides and downsides, because you’ve hedged your long positions in the index, you’ll make less upside from the index, but you’ll also lose less because of the income streams when the indices fall.
At present the yield on the SPYI is around 11.5% compared to 9% from the JEPQ. Also some of this can be attributed to SPYI selling more out of the money call options, which does not materialize.
SPYI is more defensive because of the non tech exposure, plus it has 510 total holdings, compared to the JEPQ’s 100 therefore will hold up better in a downturn.
Since its inception, SPYI has generated $7.19 of distributed income through 15 monthly distributions = 14.63% yield on capital from SPYI’s initial price of $49.13 without having to sell a single share. So capital appreciation is flat but a decent income distribution of 14%.
On a 12 month basis JEPQ appreciated 26% compared to 48% for the QQQ, but also gave a 9% income distribution.
Both have potential especially if you’re looking for downside protection given the froth in the market and overbought tech stocks.