We will evolve into them from time to time as part of our SPX trading. Yield isn't relevant as we are evolving into the box. There is also no 13F filing requirement for cash - settled index products. They can also be tax free under some corporate taxing schemes, but this has become very rare.
While technically occ is not risk free, I bet its credit would be a < 5 bps. The tax savings are significant. Take a state like MA. Treasuries will be subject to short term tax of 40percent. This will be subject to long term tax of 25percent plus long term tax of 5percent state. That is 10percent or 50bps of yield. And if you have a permanent (or very long term) allocation to the risk free rate then you would defer those taxes for a long time: that’s an extra 2percent yield for years. That can be worth an extra turn over 20 years. Btw - in 2008, the OCC had no risk of going under but the box spread was substantially higher than the treasuries as libor basis blew out. I don’t remember how wide it was, but it might have been up to 100bps. And that was the greatest financial crisis in 3 generations. But it’s all moot because, as @themickey , stated. You should just invest in the QQQ’s because it returns 15percent a year.
Yeah. @MarkBrown had a better link than the first. I still have my doubts Wouldn't 1 month treasuries held to maturity by state tax free? "Interest from Treasury bills (T-bills) is subject to federal income taxes but not state or local taxes, and is reported on Form 1099-INT" https://public.com/learn/how-are-tr...local taxes, and is reported on Form 1099-INT It sounds like you're looking at a tradeoff between being taxed as income but avoiding state tax. Or being taxed as long term capital gains but paying state tax.
BOXX is a Nod to how real and how strong inflation in USA is. Cutting out all the manipulation of how US agencies calculate inflation. If the Chart was not straight up..no one would even look at BOXX..5.25%..its just breaking even from a very very under calculated USA inflation. Most people with money they can tie up for 12 months are looking at S&P 500 and the government is trying very very hard to create establish S&P500 index without any risk at all. Because..no one can live on 5.25%. So basically, the S&P500 chart looks the same as BOXX. And finally..many many people around the world would NOT consider T Bills to be the safest investment to hold. Most everyone east of Turkey would not consider holding the actual T Bill.
It’s all about tax treatment of income. If you buy SGOV, you get interest income, which is taxed as regular income. If you buy BOXX, you don’t get any interest or dividends, you get capital appreciation, which is taxed as capital gains. It’s immensely clever and quite an amazing product. But, if the tax difference is not a big deal for you, then don’t spend another minute looking at it.
- Tax wise if for Non US resident it does not make any diff then is holding BOXX better than holding T bills? If the return is higher with BOXX is it worth the risk that it is a ETF -OCC going out of business is mentioned.. what are the chances if that happens it will be a much bigger meltdown - The broker that BOXX uses may go under and would that affect BOXXs ability to continue?
if you have no tax benefit, there’s no reason to do the BOXX over treasuries. I think the credit risk is deminimis.