ETF BuyWrite invests in global equity ETF portfolios built on peer-reviewed academic research and sells monthly from the S&P 500 index money call covering 70% of the portfolio value.
In 2022, the strategies fell by -20.9% and -9.5% respectively. Steady PutWrite underperformed the Wisdom Tree CBOE S&P 500 PutWrite ETF Benchmark (ticker: PUTW) and Steady BuyWrite outperformed the Vanguard Total World Stock ETF Benchmark (ticker: VT). Both strategies performed within expected outcomes given the losses experienced by popular stock and bond indices. For example, the Vanguard S&P 500 ETF fell -18.17% and the Vanguard Total Bond Market ETF fell -13.11%. This year was the worst year for the S&P 500 since 2008 and the worst ever for bond market ETFs and their underlying benchmark indices since 1973. It’s been a tough year for the market for long-term investors.
stable put right
We leveraged conceptual exposure to write in a year when writing lost money.
In the worst year ever for the bond market as a whole, collateral was invested in medium-term bonds instead of short-term T-bills.
When looking back at a losing year, the best way to do it is to break down your strategy into its constituent parts and ask if the beliefs you had when you first created the strategy have changed. question:
Do you still believe that selling monthly in an equity index money put will yield a positive return in the future?
Do we still believe that medium-term government bonds will continue to outperform treasury bills?
Is the level of risk exposure chosen in the strategy still appropriate?
I still believe the answer to all three questions is a resounding yes.
Writing a put to the stock market will have a positive expected return because it will be costly to the buyer in the long run. Writing a put is equivalent to selling stock market insurance, and sometimes claims have to be paid. Hedging a stock portfolio is free if writing a put does not produce a positive long-term expected return. This is definitely not the case in an efficient market.
Medium-term investment grade bonds include interest rate and credit risks that are not present in short-term government bonds. Investors know that duration risks like what happened in 2022 will occasionally present themselves and result in losses, and they demand long-term indemnification to bear these risks. Consistent long-term failures of actively managed fixed income funds.
Strategy losses in 2022 were higher, but still within the range of historical and expected results. It has been shown that more likely to have suffered more losses. Followers can easily reduce their risk by trading fewer contracts and exchanging bond ETFs for cash if desired. For public performances looking to achieve long-term compounded returns at double-digit rates, we will be disciplined and stabilize risk levels in 2023 so that we can fully participate in the eventual recovery.
ETF buy light
The ETF BuyWrite outperformed its benchmark primarily due to its overweight to value stocks, outperforming growth stocks, and gains from the sale of monthly S&P 500 calls. This strategy is designed to synthesize capital over the long term with an expected rate of return similar to Steady PutWrite, but more suitable for more passive investors and those using IRAs. Value stocks are historically attractive compared to growth stocks heading into 2023, foreign stocks are attractive compared to U.S. stocks, and I am confident that his portfolio of selected ETFs will continue to outperform benchmarks. I’m here. The out-of-the-money short call technique within the strategy works like a covered call, preserving most of the upside exposure while providing a downside cushion.
2022 has been a difficult year, but the outlook for the new year is optimistic. Bond yields have more than doubled where he was last year, boosting yields on the Steady PutWrite portfolio and mitigating duration risk. Options premiums are attractive and our Value Tilt Global Equity ETF BuyWrite portfolio looks moderately attractively valued. If you’re stuck for risk, chances are you’re stuck for reward too.We wish you all the best in 2023!
Jesse Blom is a licensed investment advisor and Lorintin Capital, LPHe provides financial planning and investment advice to clients across the United States. Jesse has been in financial services since his 2008, Certified Financial Planner™ professional. Working with a CFP® expert represents the highest standard of financial planning advice. Jesse Oral He holds a Bachelor of Science degree in Finance from Roberts University. Jesse manages the Steady PutWrite service and regularly incorporates options into client portfolios.