According to a 2016 study listed on CBOE strategy benchmark page, the 30-delta SPX monthly covered call index BXMD leads in both absolute returns and risk-adjusted returns over 30 years. Is anyone aware of any investable assets (like ETFs, mutual funds, etc) that can be purchased outright and that tracks this BXMD index? PS: I would like to use it to lay the foundation of a long-term investment portfolio, and never sell it in ~10 years, even in a major market crash. I am aware of other 50-delta covered call ETPs like PBP HSPX BWV, but I remain a bullish outlook on the upcoming decade that would be better served by OTM shorts.
Because of the upside cap, B/W ETFs will under perform the S&P 500 in an up market. PBP is the only one of the 3 that you listed that has been around for awhile (10 years). It has underperformed the SPX in every category (1-3-5-10 years). Last year it gained 8+ pct less than the SPY. Over 10 years it had an average annual Total Return of 3.78% and a 10 year Total Return of 45+ pct (with dividends reinvested). For the same time period, the SPY had an average annual Total Teturn of 8.72% and a 10 year Total Return of 198+ pct (with dividends reinvested). I realize that you are looking for an ETF that simulates the BXMD and that PBP is not your cup of tea, but I'm curious as to why you would consider these if you are outright bullish for the next decade?
If he wants more β he can just buy some SPY along with a covered-call product. Will be close enough for government work to what he wants.
Thank you for your replies, spindr0 and truetype. For this portfolio I prefer a base position with a higher Sharpe ratio and a lower beta than the broad market, so as to offset the risk of more speculative trades that I am going to layer upon it. It appears that HSPX shorts slightly OTM calls, as opposed to PBP's ATM calls. From the attached screenshot, HSPX seems to perform in between SPY and PBP. So a blend of SPY and HSPX, as truetype suggests, may be preferable.
iprome, If you want the BXMD as a core position in your portfolio then why not do it yourself? The commission at tastyworks or IBKR would be $6-$7 a month for a 10 lot trade and double that if you had to roll. With free assignment at IBKR it would be $6-$7 a month. You'd have the ability tailor the call writing to whatever perception you had at the time. Each month, you could select a higher or lower delta strike to sell as well as underwrite if more bullish. Though it would involve some more time then just buying an ETF, my guess is that you would incur a lower expense rate than the ETF and you'd have exactly what you were seeking (BXMD performance if you didn't vary the strikes and number of calls written).
Hi spindr0, I don't mind managing it myself, but my primary concern of doing it myself is potentially unfavorable tax treatments. I would like the core position (including the call premiums) to enjoy long-term capital gains...
"I would like the core position (including the call premiums) to enjoy long-term capital gains." I'm not sure about that. Last year, PBP distributed $2.33 for a distribution yield of 10.87 pct. and it was considered dividend income. I would assumes that's non qualified since they're writing and realizing monthly but I'm guessing at that.