ETV
Eaton Vance Tax Managed Buy Write Opportunities Closed Fund
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A reminder to check NAV premium or discount on your closed-end funds
Denali Therapeutics Announces Positive Interim Data from Phase 1/2 Study with ETV:IDS (DNL310) in Patients with the Lysosomal Storage Disease Hunter Syndrome (MPS II)
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So many of you have told the OP to buy and hold, then sell sometime in the future, after appreciation. You're missing a key point: the OP is looking for some immediate or near-term income - there's a sh\*#load of frustration and impatience in that post. The other thing y'all aren't hearing is that the OP seems to be stuck in a 'no/low risk but high reward' mindset. The OP mentioned having a bond fund/funds. That tells me real risk aversion. So the OP needs to relax a little AND be rewarded with seeing tangible portfolio increases in the Roth, my guess within the next 6 mnth or a year, before he/she jumps off a cliff. I'm going to suggest baby steps for this OP. If it isn't like this already within the Roth, change it to: 1/4 Bond of something like SGOV, for security, 1/4 Growth like VOO (which will be realllllly tough for the OP to have faith in, this can take years in a flat market), 1/4 in a middle-of the road ETF like SCHD, and 1/4 in covered call ETFs, like QQQI and SPYI. << That last one is where the instant gratification is. Further, you all are wrong to say ETFs don't appreciate. I'm looking at my Schwab now and I have some covered call funds - SPYI, for example - that has a 38% appreciation in less than 2 years, PLUS the 10%+ yield. The worst performer I've had (which I sold a few years ago) was JEPI. I have ETV, which gives me a solid 7% yield with only 12% appreciation in 2 years, but I keep it because it is tax-advantageous, somthing the OP doesn't need to worry about. I also have GPIQ and NIHI, among others. I'm trying to post a screenshot of a partial view of my portfolio on here but I can't seem to do so. All in all, I don't believe that over the long term the OP needs a big covered call portfolio. But to kick start their psyche, yes, it's a good move.
To honest, I was and am a bit tempted by SPYI because of the tax optimization and their claim their strategy minimizes losses after bear markets (I imagine this might going easy on the covered calls after the market has fallen). Yet I look at similar Eaton Vance funds like ETV and see how they were permanently nicked during the downturn - ETV is still down 20% from 2007 in *nominal* dollars, though it paid 8% or so for 18 years. SPYI and VYMI don't have a history going back to the 2008. Under efficient market theory, there should be no difference in expected returns of SPYI and SPY. But the same theory says 10 year T-bills have the same expected return as stocks. Oh well. On the, um, third hand, the ability to cash out 12% a year (as untaxed return of capital) means that if you hold on for four years, you're kind of covered for a crash. SPYI is paying 12%, so it is matching the overall market for the past decade. This is something I might buy in downturn.
In recent weeks n months, I looked up a bunch of ETFs' holdings on [crueltyfreeinvesting.org](http://crueltyfreeinvesting.org) n noticed it's hard to find some with 0 stocks that exploit animals in some way, but, \-A home builder ETF only had 2 stocks showing animal exploitation (1 was probably Kohls or Home Depot, seemingly because they sold some pest control thing n had some gloves made from animal(s), or something). \-XLK only had 1 (stock HPE for animal testing for their printer ink, but yahoo says they dont exploit animals, n some gold member on some site said the "animal testing" was actually tests on bacteria or a germ or something, n some site says they help wildlife via using some tech tracking, or something). \-XTL had 0 animal exploitation. \-GLDM is a gold ETV or something, so I assume it doesn't exploit animals. \-Gladstone Land is a REIT for farmland n drinking water. \-WP Carey is a large, diversified Industrial REIT that currently looks cheap n safe. Always double check what people, including me, say, for errors, n for outdated info. Does this help?
Not a penny stock, but try convincing the TSLY holders on r/YieldMaxETFs. As soon as I heard RS, I bailed with an $1800 loss. Put the remainder in an ultra conservative ETV.
Can one of you money bags buy me this avatar? [https://www.reddit.com/avatar/shop/product/storefront\_nft\_01H31E72WDWCPT2XM554C75ETV?utm\_medium=ios\_app&utm\_source=share](https://www.reddit.com/avatar/shop/product/storefront_nft_01H31E72WDWCPT2XM554C75ETV?utm_medium=ios_app&utm_source=share) 
From Least Risk to Most Risk: 1. Treasuries bought directly (as opposed to through an ETF). Treasury Direct sells bonds and they pay twice a year. These bonds are about as safe as it is possible to find so long as you are holding the bonds directly and aren't investing in a fund that holds bonds. The payments are currently in the \~3% range for 20y and 30y and so long as you buy them higher than 2.5 you will earn a real return, but the return will never grow. You can also go with 10y bonds depending on what you want to do. 2. Corporate Bonds, muni bonds, and preferred shares. These you'll usually buy through an ETF and you'll have to do some research into which ETF you want to invest into. These are still bonds, so retain a lot of the safety of Treasuries, but they have origination risk so usually carry a 1-2% premium in their yield to account for that risk over Treasuries. 3. Dividend Aristocrats. There are many ETFs that track them or subsets of them, but SCHD is the most common one. The dividend payment is going to be lower than a bond would pay, but you gain a history of yields increasing roughly in line with inflation at the expense that your principal is at risk. Historical norms predict that the principal should go up over time so long as you can wait 15 years, but past returns do not predict future returns. That said, Dividend Aristocrats are the safest of equity stocks as far as not losing principal. 4. S&P 500. There are likely 100s of S&P 500 funds that exist out there and my favorite is SPLG personally. This is kind of the gold standard of funds as far as total return is concerned, the downside is that the dividend income is much smaller than the dividend aristocrats so you'd have to sell shares to get a decent return. Generally speaking you can sell 2% of the principal each year without to much risk, but that 2% hurts a lot in times like 2022 and this introduces entry and exit risk which is a very significant risk. If you just live off of the dividends than you will avoid this risk and historically the S&P is the benchmark that everybody else compares themselves to. 5. This is where we get off the beaten path and there are a lot of additional risks from here. CC ETFs r/qyldgang is the home for conversations on this topic, but just know there are a lot of risks with CC ETFs which is why the yield is so much higher. DIVO, QYLD/RYLD/XYLD, ETV, and JEPI are the most talked about ETFs, but there are a lot of new funds getting opened all the time with variations on the CC theme. Generally speaking you trade a higher annual yield for lower total return so this is not going to be right for every person, but it can allow you to retire off a smaller principal balance compared to the above. 6. Leveraged Bond funds. the two that I hold are PML and FFC and they take on a significant amount of leverage to juice the yield of their holdings. They struggle in raising rate environments and excel in dropping or stable rate environments so they have a lot of entry risk if you buy at the bottom of rates, but they can still produce a lot of stable yield even if the principal is at risk. With all this said, the best option for you is likely going to be a combination of the above categories weighted based on your mom's age, ability to keep working, the risk tolerance for losing the principal, and the ability for your mom to wait out market downturns and not sell shares unless required.
Buy 50% in large cap stocks i.e. APPLE,MICROSOFT,BRKB,AMAZON and some sector specific ETV. Buy 20% in mid cap stock where company growth is above 50%, likely this will be software but buy at right price, not more then 20 times sale. You can do some CC on above stock positions for consistent income. Then buy 20% with VOOV of value stocks which have dividend. Buy 10% in options but understand the risk here, this 10% can become ZERO before you blink EYE. This sub will make u believe investing in gambling but it is not. In fact trading also isn't entirely gambling, If you have a discipline. Choose your poison and play with it.
you can invest that money in high paying monthly dividend stocks. for example if you invest that in ETO you will get just almost 1000$ each month just from dividends. if you invest that money in ETV you will get more than 1000$ each month just from dividends. Because you are very young and have time you can also choose growth. you can invest 80% of that money in growth companies like Google Amazon Nvidia and AMD and with the remaining 20% you can buy options.
On the dip around 380 , when everyone was selling I bought 60k of muni bonds split evenly between IIM , PML , MQT. And about 5k of ETV. And 800.00 of ADX. And about 17k of FOF .
CEFs are funny. Buying below nav on a muni that yields 6% seems baller. If you have a high net worth and aren't using these instruments you are crazy. Who cares what your total asset value is if you have big cash flow. I also use BST. Spread your dollars around and evaluate the fund and if 10k = 600 tax free per annum, you're sipping gravy. I watch MQY, ETV etc. Big accounts using these products for income is sensible and you can add MLP, covered call, etc to get a tidy return. Most buy and hold peeps have no muny, and don't understand cash flow and household expenses.
u/DaCrew44, thanks for asking. Here is a quick update on this trade (as of May 31, 2021): So far so good. It has been a full six months since I executed this trade: * I have paid $3,124 in interest costs over the past 6 months for the margin loan * I have received $22,458 in dividend income over the past 6 months * My gain in ETV stock has been $43,580 over the past 6 months (this is gravy and was not part of the initial investment thesis) So a “return” of $66,038 based on an investment cost of $3,124 ain’t bad. BUT, this is still really really early and this trade is very risky. I’m thinking about seeing how this goes for another 6 months then initiating another trade like this with a larger amount of money
I've made money off that stock! ETV is a fluctuating fucker.. Check it out.
(ETV) 0.91 beta. 11 cent dividend per month. Goes up b4 record date, goes down after. I buy right back in. Reinvest dividend into shares. Repeat monthly. It's worked so far.. JS.
I have QYLD, ETV, and SLVO in my Roth, I figure for how much money is lost on call options, somebody has to be making money selling them, might was well wet the beak
SHW .. Look into it! It's on the rise! ETV.. On the rise! Plus nice dividend, monthly! PBA.. Just missed earnings, dropped a buck Friday. Maybe a play Monday or Tuesday. Nice monthly dividend too.
100% on ETV and loving the dividends lol
ETV for monthly dividend.
>ETV This is just a covered call ETF reworded as "buy writes." Its a play on options so no, its not safe but its as safe as you can get with options. There is always a chance of book value losses and generally speaking, when that happens, there is no way for the fund to make it up and that results in a dividend cut especially for a CEF. There were tons of these funds back before the 2008 crash and they all ate major poop during that crash because they lost a ton of book value. Once the dust cleared, they had to cut divs a lot if they even survived. Do note that there are a lot of issues with covered call and CEF's. Covered calls limit your upside. This is why a loss of book value is almost impossible to recover from for these ETF's. Second, CEFs usually have insane fees and those fees eat a lot of your profit. Its almost always better to do covered calls yourself. You can easily do a diverse covered call with a index fund ETF then just sell calls. Thats usually safer than a CEF without the fees. This particular fund charges about 1%. Since your cap on profit is 11%, it means they current take a 9% cut of profits. And odds are if they cut dividends, they will still charge you the same fee. So say markets crash, their portfolio is cut in half, and divs are cut to 6%. They still take their 1% and you are now paying them about 17% of the profit. Avoid CEFs. They are far worse than ETF's and from those, avoid anything with over 0.2% fees (and even that is too high today). Otherwise you are better off doing it yourself especially since trades are free these days. Just buy the same stocks, and sell calls. Or if you want ultra super easy, buy a high volume ETF index fund like VTI and sell calls on it.
What is your goal with such heavy exposure to ETV?
I've never seen ETV before. So, if I understand correctly, the stock just stays at the same price no matter what and continuously pays out an 8% dividend? Is that really as safe as it looks, or is there more to it?
80% ETV 20% SPCE What do y'all think?
Whats your opinion of stocks like ETV and the other products eaton vance offers? This is straight up dividends that pay high %s for a long time now
1 million invested into ETV which pays .11 cent dividend a month will net you 7200 a month or so. If you live in a cheap state like IN or OH then you can live like a king on that. Plus never touch the milly.
You should look at more than just the dividend yield before considering purchasing a stock/fund. The expense ratio for ETV is 1.09%. That’s really high, considering the average ER % for an actively managed fund is anywhere between .5-.75%. For every $10k you invest in the fund, you’ll lose about $109 to fees, with the risk of more losses if the fund takes a blow on one or more of its trades.
I really appreciate your response! I should have pointed out I paid off my $370k mortgage last year and drive around my first vehicle still because I'm cheap. Thanks for pointing out the ETV fund performance issues and I was just about to type why would it matter if I'm going for dividends then quickly realized if it performs poorly then dividends won't go up etc etc. I keep hearing Vangiard referenced, specifically their target funds like you mentioned :)
This comment isn’t financial advice: > I am very new to investing. Stick with index funds or target date funds for the absolute best results, and do not panic sell. > My plan was to retire eventually and live off dividends. Harsh truth: Probably won’t happen For Fun: By the year 2053, you will need $132,225 a year to have the equivalent of $60k in today’s money. The current yield of the S&P500 is 1.43%. This means you’d need $9.2M invested by the age of 65 to be able to live off dividends. However I assume you’re used to a much more expensive lifestyle because 5k a month is what you’re willing to throw at stocks. At 5k a month until you’re 65 you’d end up with around $6.5 million. Another harsh truth: Honestly there’s no logical basis for you to prefer cash from a dividend over cash from selling shares before taxes and fees. https://youtu.be/f5j9v9dfinQ > I saw someone mention the Eaton ETV fund on here but after doing a lot of looking online etc I don't see it mentioned much. Given it's over 8% dividend etc why isn't this fund more popular? Because it’s had a historically poor performance. You would’ve blasted yourself in the foot by investing in that. Also don’t take advice from here very seriously. This sub and Reddit in general is full of novices who think they’re better than Warren Buffett. That confidence is often borne out of ignorance. > Is it worth investing thousands a month into this fund? Is there something else more attractive? It would be better to invest in a good balanced portfolio of index funds or a target date fund or two depending how hands-on you want to be. Target Date Funds, the most hands-off approach: VFIFX: 2050 Target date fund VFFVX: 2055 Target date fund VTTSX: 2060 Target date fund. If you want a more hands-on approach that will give you the best results, go with index funds: https://www.bogleheads.org r/bogleheads VTI: US Total market fund VXUS: Total International AGG: US Aggregate Bond Fund What I’ve heard some people do is look at the Target date fund’s holdings and then mimic it with their index funds for a cheaper expense ratio. Example: VFFVX’s holdings: 54% in VTI 36.3% in VXUS 6.7% in BND 2.9% in BNDX
I mentioned EPD because it's a midstream company like ET. ETV is a different class.
I like ETV honestly.. Pretty solid and hangs around 15.38 a share recently.. Paying .11 cents a month.
The thing that makes me roll my eyes is that they aren’t just about dividends, but low yield “aristocrats” - they pay out shit, but at least they also don’t grow! I get yield chasing can be risky because you might be buying shitboxes, but there’s plenty of good stuff that offers high single digit yield. I own some div stuff in my Roth, namely reits because corona aside people will always need space to live, and ETV/QYLD because with how much money is lost buying options I figure the sellers have to be doing ok
If you really want income I like NLY or you can go with ETV or QYLD the latter two are funds that do covered calls, basically buying shares of theta gang. Yields in high single digits
I think that depends on the interest rate of your loan. Look at ETV. Not volatile at all and it pays a monthly dividend yielding 8.7% as of this writing. If your loan rate is lower, I would park it here and just pay off the loan monthly.
Intead of a high interest account, I would park it into some high dividend accounts. My big two are T & ETV; ETV pays .11 cents/month and probably as stable as you can get. 60k into that grabs you about $440 in dividend each month qnd relatively low risk investment. My 2 year old's account is 100%in there. At 20,000 shares you could easily retire [that's what in building up towards] Not financial advice though.
ETV.. Solid. Boring. Pays a monthly dividend. Not financial advice. Just like the stock!
I'm looking at ETV and T as some long term holds. At&t has a nolice dividend and undervalued. Etv is a steal under$15 with a 9% return almost - pretty stable
Domo Cap is also bullish on this and they got GME right early on as well. I am tempted to add a position. Its strike already doubled from 15 to 30, so what is your ETV (estimated fair value)
ETV .. It's boring. But it pays a monthly dividend and has grown up well. Just in case anyone cares. Anyone? Hello? 😂😂😂
Net investment income and/or SEC yield usually tells you, and some funds calculate the relevant ratios for you. ETV does some of the calculations, just search for net investment income until you get a ratio, but doesn't include call option premiums in this, and calculating it for the options is too complex for me, sadly.
An example would be a stop loss of 20%. You are 2x leveraged going into a 20% correction, so you are down 40% when you "get out". Now here is the rub, with any rules based strategy volatility will whipsaw your portfolio. If you wait for ETV to recover before buying back in, you are still down 40%. If you say I will deleverage to 1x at a 20% drawdown (40% loss on your equity) and it recovers, you are still down around 20%. If you get out and say I'll get back in at that price on the way up, if it hits that price, you get in at 2X and it goes down another 20%, you are now down about 80% on your equity. It's hard enough staying invested while the world is on fire, dousing your portfolio with gasoline won't help.
That invest underperformed VOO over the last 10 years. VOO had a CAGR of 13.77% and ETV is 11.38%. ETV was not able to outperform enough to account for its management fees. You could buy VOO and make your own dividend by selling shares every month and receiving a capital gain. If the market crashes both of the ETFs would collapse, so that is a wash IMO.
That's because if you look at the underlying, ETV looks a lot like the index.
ETV is literally a group of growth equities with covered call writing. It's really bad in that it is highly subject to all the downside risk of normal downturns while also sacrificing some of the upside to generate income.
Sorry got the wrong fund, all of the points still apply, although the options make it very difficult to have exact numbers for some of the figures. So the way distributions work for most CEFs is like this. CEFs earn some amount of money from dividends, call option writing, etc. Let's call this X. CEFs decide how much to distribute to shareholders. This is the monthly check you receive. Let's call this Y. In most cases, Y > X, meaning that the fund is sending you more money in your check than they earn from dividends, writing call options, etc. Were does this extra money come from? It comes from the fund selling some of their shares / investments. As equities tend to go up this isn't that much of an issue. The fund sells some of their shares every year, but the remainder go up in value so it is a wash. The fund could also technically have Y < X, in which case the distribution is smaller than the check. This only happens if the fund decides to keep some of their dividends, call option writing inside the fund to purchase more shares. Rare, but not impossible. The important thing to understand is that the distribution itself, the check that the fund is sending you, carries basically no information about the fund, its performance, its income, etc. ETV could decide to increase their distribution to 30% and nothing much would happen to your returns (distributions + capital gains). You would get a bigger check, but the fund would be forced to sell of a big chunk of their shares to get the money for the mammoth distribution, so its share price should decrease by about the same amount. These two things would cancel out. The fund could also decide to cut their distribution to 0% and reinvest their dividends / call option premiums. Your check would be smaller, but the fund's share price should increase. Hopefully that makes sense!
Thanks for the comments. These are really good points. Just to clarify, the fund I’m talking about is ETV. Not EVT. Not sure it make a difference with most of your points though. Yes, the amount of the distributions are solely up to the Fund. And while the past is in no way a prediction of the future, the fund has been extremlely consistent with its monthly dividend over the past 11 years. The part I don’t think I understand is the “yield”, “income”, “distribution” differences. I’m not sure what you call it, but I get a “check” every month from the fund that is the same each month. The check size is same as I assumed it would be before I made this trade. I did base my strategy on this as a key assumption. Also, I would like to better understand your “selling stocks and wiring me the proceeds” comment. Since the fund has a NYSE public share price, I can sell my position at any time and it will be based on the NYSE public share price and not anything else. How does the “selling stocks” comment effect me? Is it because my cost basis will be lower than the $14.80 I purchased the fund at because of all the “return of capital” distributions? Any help you can provide to clarify would be great. Thx I think ETV make the majority of it’s income on the premiums on the covered calls it writes, which helps with the distributions each month.
If you're a millionaire or near-millionaire and that $500,000 of margin is only a portion of your overall net worth, I'd agree. But, DD or not, if you're throwing $500k of "not your money" that you can't afford to cover into a single stock because it has dividends, this is setting up for WSB loss porn material right here. Especially considering that only a year ago ETV dropped from $15.10 to $9.72, which could potentially trigger a forced sale whether OP wants it or not. That 2020 scenario repeating would result in a roughly $180k loss, not including fees. I get that dividends are nice, but I'd be looking into more diversification or maybe a higher-value stock with smaller dips. Just my opinion.
If you wouldn't buy ETV with only your own money, you really shouldn't want to buy it with your own money PLUS borrowed money. Think about it...
Thanks for the input. The good think is that ETV has never fallen 50% in one day. If the stock price drops beyond a certain point, I can always get out before it gets too bad
These are some really good points. I do tend to over rotate on current cash income. I like ETV because of the consistent monthly dividend. I may be retiring soon and want to add another passive income stream to my portfolio. There are for sure other liquid assets out there, but most don’t pay a 9% monthly dividend. I know that total return can be better with VOO, or VTSAX, but then I have to sell a portion each month (and pay S/T cap gains) to get the dividend income and the appreciation in the stock price is not usually in a straight line. This is not as passive as I’d like it to be. Having said that, you have helped me think about the total return (dividends + price appreciation) as opposed to just the dividends. Thanks for that.
You will get blown out of your position at the absolute worst time, at the bottom of the market. IB will and has raised margin requirements as volatility increases, and we all know vol increase means stocks going down. Margin is calculated in real-time intraday, and peak to trough ETV has fallen more than 50+ %. ETV will fall 50%+ peak to trough at some point in the future, just a matter of time, IB will raise margin requirements and you will be blown out of your entire portfolio. I've only seen 2 people/groups 10+ million and you bet your ass it was because of leverage. Stocks are inherently leveraged because they issue debt, stacking margin on top of that is just adding to the madness. Get rich slowly, stay rich, make your kids rich.
Great recommendation. I have QYLD on my short list. They have a higher yield than ETV. Their stock price performance is a little worse and their dividend isn’t as tax efficient (most of it is short-term cap gains)
This is a good point, but I don’t want to own ETV as an investment without a margin loan underneath. In other words, i would not not purchase ETV if I had cash as I don’t view it as a great equity appreciation bet. I only view it as a decent dividend play.
I don't get why you're so particularly enamored with ETV. First, it's great you can get 1.5% debt (albeit w/ margin call risk). So great job, no more to say on that. Beyond that, is this any different than borrowing at 1.5% and investing in ANY liquid asset that you think will earn 9%? Not really. The only superficial benefit here is you are deferring taxes on current cash income, but that's not HUGE, particularly since the return of capital distributions are reducing your cost basis. In fact, it seems like you're getting caught up in that not huge tax benefit and missing two important points: 1) This stock has pretty significantly underperformed the total stock market in recent years, even though it's like 1/3 FAANG! Example: 9% CAGR since 2015 vs. 12.6% VT. So, assuming that total return underperformance continues, you would be better off just buying VT/SPY/etc with your margin debt and creating your own 9% after-tax dividend by selling \~10% of the position every year (\~2% div yield + \~10%, so \~12% pre-tax yield, and assuming taxed at \~25% LT/div all-in rates). 2) Despite that underperformance, this stock is very highly correlated to the broader stock market (e.g., 30 day correlation since 2010 is 0.7) and that correlation has RISEN in every crash since then (e.g., rose to 0.97 in COVID crash), so taking on margin debt secured against a portfolio that sounds like is basically the S&P in order to invest in something that is basically a shitty S&P means, yup, you guessed it, high probability of margin call in a crash. Conversely, taking on margin debt with this kind of spread (9%-1.5%) to invest in assets that have low correlation to the rest of your portfolio - and bonus points if that correlation falls in downturns - can be a great idea. One other thought FWIW: the 9% is almost certainly way too aggressive of a number to have in your head going forward given likely path of interest rates and valuations. So if you're going to create the synthetic 9% I've described above, maybe think about 6% or 7% instead of 9%.
Good question. ETV was the least volatile vs those other two. Also, I think ETV’s yield was a bit higher.
Why did you choose ETV over EXD and ETW?
Thanks. I already had an account with IB with several securities in it (mostly S&P 500 ETFs) so I’m not opening an IB account just for this trade. I’m just trying to use leverage on my existing brokerage account to generate more income. So I don’t have $1m in ETV.
Why are you using 3%/year as your doomsday when ETV already had a 5 year period far worse than your doomsday? June 2007-June 2012, the lost ~9% a year. And you seem to be understating getting margined called. Especially because that’s probably happening when the S&P 500 is crashing, their underlying holdings are not sufficiently different to allow one to crash without the other also crashing.
As someone new to all this, there are two separate risk categories here, right? 1) the margin borrowing (same for both esi192's example and yours), 2) the ETV closed end fund with monthly payments vs. owning a chunk of SPY and ?continuously rolling a bunch of SPY futures? If I have my givens right, could you talk more about the pros/cons of part 2?
Hey checking some rough numbers. You would have to already have had 500k in stock to get this leverage ( at least to open the trade). I'm not sure what else you have but to analyze this directly I'm going to just assume you actually have a full $1mil in ETV. Monthly your return is (3223 * 2) / (500k cash in) = 1.29% That annualizes out to 16.6% which is pretty good when times are good. The trick is rebalancing, technically speaking the more often you rebalance the better you mitigate that fat left tailed risk you are just going to get some leveraged decay. You might be better off with SSO as a high leveraged fund or some combination of the two. Margin is technically free for futures since it's just a contract. (They actually perform almost as if they pay dividends since there is an arbitrage opportunity if the long position doesn't return high enough) As of the time of writing this the forward P/S of the s&p 500 is really high and I don't buy a higher earnings growth rate to support it so it wouldn't be my suggestion but to each his own.
It looks like ETV has historically dropped whenever the S&P 500 has. So if you get margin called, it would likely happen when they are both down. I don't trade on margin so I'm not familiar with the particular mechanisms.
That is essentially a margin call. The value of ETV dropping would not trigger a margin call. My underlying security as collateral needs to drop to trigger a margin call. The underlying security is essentially the S&P 500 index. If ETV falls, that only impacts my return.
> Worst Case Scenario Can Happen - Suppose IB raises its margin loan rates to 4%, ETV’s stock price drops 3%/year AND they cut their dividend by 22%. I would consider this the doomsday scenario. Even if that happens, the return on this trade is 100% What if your collateral drops in value at the same time as ETV? Wouldn't IB want to protect themselves and ask you to put up more collateral or margin call you?
if you used that margin loan 500k to buy: * spy - youd have outperformed by 6.25% since 2016 (ETV inception) or 1% more a year * bought 25 ES1 futures (\~5mm of spx exposure) youd have returned 2.75mm so yeah, what you've posted is an example of how to use leverage, but in the worst possible way. so theres...that.
Looks like ETV did have a 50% drawdown in 2008. So, you could get margin called in the worst case scenario. I might suggest borrowing slightly less, to be resilient to an even larger crash. Or, maybe diversify your high dividend holdings. Otherwise, this does seem like free money, and I keep wondering why I'm not doing it. If I could even do a smaller IB margin loan at maybe 2% and get 4% dividends, that's also free income every month.
Your Number 2...Is that the Sprott Physical Silver Trust ETV currently at $9.81???? Thank you?