I thoroughly enjoyed this piece and your excellent insights on taxation. I personally use JEPQ. There’s a few points I figured I’d share. I disagree from your generalizations about lack of institutional appetite. I think you’re right, but for the wrong reason. Hamilton Reiner has introduced the first of many institutional strategies in a form/wrapper retail investors can use. These institutions have the resources needed to do these strategies manually and at scale. But the underlying strategy is used by every institution and current market regime and structure can show this. Although not tax efficient, these distribute higher tax efficient yields than most indices with similar risk profiles. For example, the quantitative metrics for a position like JEPQ offer almost all the upside as QQQ with less of the downside. It also has allowed investors to participate in a higher weighting in Mag 7 stocks versus other indices covered call strategies. Where these strategies will suffer is if there’s a shift in market structure with options premium moving rapidly. To this I’d say “Thanks 0DTE”. Overall however, statistically these strategies can produce better risk adjusted returns over multiple market regimes and cycles.
I thoroughly enjoyed this piece and your excellent insights on taxation. I personally use JEPQ. There’s a few points I figured I’d share. I disagree from your generalizations about lack of institutional appetite. I think you’re right, but for the wrong reason. Hamilton Reiner has introduced the first of many institutional strategies in a form/wrapper retail investors can use. These institutions have the resources needed to do these strategies manually and at scale. But the underlying strategy is used by every institution and current market regime and structure can show this. Although not tax efficient, these distribute higher tax efficient yields than most indices with similar risk profiles. For example, the quantitative metrics for a position like JEPQ offer almost all the upside as QQQ with less of the downside. It also has allowed investors to participate in a higher weighting in Mag 7 stocks versus other indices covered call strategies. Where these strategies will suffer is if there’s a shift in market structure with options premium moving rapidly. To this I’d say “Thanks 0DTE”. Overall however, statistically these strategies can produce better risk adjusted returns over multiple market regimes and cycles.