Editor's note: For a long time, most folks thought options were too difficult and confusing. Now, since 2020, investments in option-selling funds have exploded... but one secret makes this approach even better. In this piece – adapted from Dr. David "Doc" Eifrig's free Health & Wealth Bulletin e-letter – Doc explains why his trading strategy still outperforms these increasingly popular funds...
Funds Don't Always Do It Better By Dr. David Eifrig, editor, Retirement Trader
During my time trading for Goldman Sachs, I stumbled upon a strategy that would forever change my life. This strategy has allowed me to collect hundreds and thousands of dollars each and every month. And it has helped me make my mark after I joined Stansberry Research more than a decade ago. But the masses didn't seem to pay it much attention... until recently. Now, investors have more than 50 different ways to invest in this strategy. They've increased investments 20-fold over the past few years. But we're still doing things a bit differently... And you might want to think twice before rushing your money into a "set it and forget it" fund. Let's get into the details... The chart below looks at the biggest net inflows for active equity exchange-traded funds ("ETFs"). Folks have been piling into BlackRock's iShares U.S. Equity Factor Rotation Active Fund (DYNF) the most, by far. (We won't get into all the details today, but factor investing is a form of quantitative investing, which has been all the rage recently.) What may surprise you are the second and third ETFs on this list. Take a look... 
The JPMorgan Nasdaq Equity Premium Income Fund (JEPQ) and the JPMorgan Equity Premium Income Fund (JEPI) are both covered-call funds. They buy stock and sell options to help generate income. Both funds boast yields much higher than a traditional Nasdaq or S&P 500 fund. More than a decade ago, it was hard to convince even my family and closest friends to sell options. They have a bad reputation. But today, billions of dollars are pouring into these option-selling ETFs. And it's not just JPMorgan's option-selling funds... According to a Financial Times article, ETFs dedicated to selling covered calls surged from just $3 billion in total assets in 2020 to nearly $60 billion in December 2023. Think about that... In just three years, investors put nearly 20 times as much money into ETFs dedicated to one of my favorite strategies... selling covered calls. There are now 60-plus covered-call ETFs to choose from – nearly triple the selection that folks had three years ago. If you've been following me for long, you'll know that I launched my own option-selling service, Retirement Trader, in 2010. It was a hard sell at the time, even with my background in derivatives. But I was adamant that option selling was the ultimate tool for safe income. Now, the rest of the investing world has caught on. But even though all this money is flowing into option-selling funds, I don't think they can compete with what we do in Retirement Trader... Consider the Invesco S&P 500 BuyWrite Fund (PBP), which has been around longer than most covered-call funds. I wrote about PBP in 2013. Specifically, I said... In particular, [PBP] tends to underperform the S&P 500 during rising stock markets. But it makes up for that by consistently outperforming the market during falling periods. Without getting too into the weeds, that's expected for most covered-call trading. If stocks are soaring, a covered-call strategy will lag because your upside is capped in each trade... But because option sellers collect premium – and the premium payment gets larger when stocks fall – you can lose less in down markets. Basically, the covered-call ETF strategy is to take the market's return and smooth its volatility. With that in mind, PBP has lived up to that description recently... In 2022, the S&P 500 fell nearly 20%. PBP was only down 11.7% for the year. In 2023, stocks surged nearly 25%. PBP was also up, but only by 11.4%. For PBP and most covered-call traders, these results are fine. They're expected. But in Retirement Trader, we're not doing the same thing as these covered-call funds... And we're certainly not satisfied just keeping up with PBP or any of the growing number of funds. After all, even if PBP fell by barely half the amount of the S&P 500 in 2022, it still faced a double-digit decline. Unlike most of these funds, we don't just sell options on the S&P 500 or Nasdaq indexes. We handpick each option trade based on market conditions. And we have averaged double-digit annualized returns since our inception in 2010 on closed trades. As always, our philosophy is that investing is best done for yourself... because nobody cares more about your money than you. We've certainly proven that our conservative trading-for-income strategy can work in nearly any environment. And it does much better than any covered-call ETF you will find in the market. So don't content yourself with the status quo. Once you learn how to sell options on your own, you'll unlock an income secret that's much easier than you might think. Here's to our health, wealth, and a great retirement, Dr. David Eifrig
Editor's note: Doc's income strategy has achieved a 95% win rate over the past 14 years. One of his subscribers has been using it to collect as much as $8,000 per month... nearly $118,000 in total now. And if you've never traded options before, don't worry – neither had this subscriber... Click here to learn more. Further Reading According to Doc, selling options is a bit like being a "stock market landlord." Using his strategy, investors collect income on shares – just like landlords do on property. But unlike in real estate, this approach can help you earn steady, safe income without being tied to one "building"... Learn more here. "Money in my pocket always meant more to me than a potential triple-digit winner that required things to work out perfectly," Doc writes. Over 50-plus years, Doc says only one group of stocks has followed this philosophy. And it has crushed the returns of every other group... Read more here. |
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