John Hood Global X NASDAQ 100 Covered Call ETF QYLD-Q DON'T BUY Jun 29, 2023

Warning flags. US-based product. Never trust yield. Covered calls on this product don't get the favourable capital gains treatment. It might be OK in an RRSP, RRIF, or RESP, but not in a TFSA. You're not hitting the sweet spot of favourable tax treatment.

Doesn't like writing covered calls on stuff that's very volatile, such as NASDAQ, gold, or oils.

John Hood

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COMMENT

A covered call version of the NASDAQ 100. If you want a yield from technology, it is a way to do this. Normally, you don't want to give away growth to yield. A consideration to think about.

COMMENT

11-12% yield. Only problem with the covered call is that when the index (here, the NASDAQ) is doing well, you're better off owning the underlying securities. YTD, QYLD is up 6.3%, whereas the NASDAQ is up 18%. Good strategy if you think the underlying index will be negative or flat.

PARTIAL BUY

If you are aggressive, then you do not want this since it gives up upside. However, for a defensive play, you should have this in your portfolio. The enhanced yield will give you a slightly bigger return if there is a sell off. However, it does not protect you from dowside.

WAIT

As interest rates go up, the Nasdaq underperforms. Would wait for the 200 day average to be tested. The technical support is close to 300. Could be 3 to 15% downside for a correction.

DON'T BUY

Enhanced dividend yield of 12%. Total return over the last 3 years was 5.68% vs. 59% for the NASDAQ 100. YTD, down 17%, vs. the NASDAQ down 24%, so you can see how the covered call strategy works in a falling market. But long term, stocks tend to move higher, not lower. Paying a higher management fee for covered calls, about 60 bps for this one. You can buy a NASDAQ 100 index much cheaper.

BUY ON WEAKNESS

Limits upside potential with covered call protection
Good defensive name.
Lower volatility.

COMMENT

It is OK for income strategies. It has returned 26 1/2% over the past year but owning the actual Nasdaq 100 would have returned 43%. It is better to buy the actual stocks if you don't need the income.

HOLD

High yield good for dividend oriented investors. Good exposure to Nasdaq 100. Good for exposure to technology in a defensive way.

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John Hood Global X NASDAQ 100 Covered Call ETF QYLD-Q DON'T BUY Jun 29, 2023

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