LQDW ETF

Investors may be overexposed to cash, with money market assets totaling $6.1 trillion, highlighting the need for diversified income sources. Moving money to bonds can outperform cash, especially in the months after the first rate cut. But bond ETFs offers lower yields with certain volatility. LQDW deploys covered call strategies on the Investment Grade Corporate Bond ETF (LQD) to get high yield (16%) with historical volatility at low single digit.

iShares Investment Grade Corporate Bond Buywrite Strategy ETF has significantly underperformed its underlying asset, LQD, due to its covered call strategy. LQDW's unsustainable options strategy causes significant NAV erosion, making it a poor choice for long-term investors. NAV drops that are larger than the underlying asset show that LQDW's trades are frequently unprofitable. The fund barely holds its value, even with all distributions reinvested.

iShares Investment Grade Corporate Bond Buywrite Strategy ETF pays a 2-digit yield thanks to a covered call strategy based on a bond ETF. Such a fund is likely to attract income-oriented investors. However, historical data point to a heavy loss in capital and a shrinking average distribution in just 2 years of existence.

LQDW is a covered call strategy that involves writing calls on the LQD while also taking a long position. It can be a good option if you anticipate downside in the LQD, but there is still potential for downside risk. However, it may not be ideal if you are expecting significant upside in the LQD.

The iShares Investment Grade Corporate Bond Buywrite Strategy ETF has lost money since its launch in August 2022 due to rising yields and extreme volatility. The ETF should perform better in 2024 as high Treasury yields and implied volatility rates result in strong income, while the scope for large moved in yields has diminished. A renewed rise in inflation poses the main risk to the LQDW as it would put upside pressure on yields as well as potentially triggering a rise in volatility.

iShares Investment Grade Corporate Bond BuyWrite Strategy ETF aims to generate high yields by writing covered calls on investment grade corporate bonds. The fund has underperformed its underlying assets even when it theoretically should have outperformed, highlighting the limitations of covered call strategies in volatile markets. Investors can potentially improve returns by converting the fund to a covered call spread fund or by buying a mix of LQD-LQDW for high yield and upside participation.

iShares Investment Grade Corporate Bond Buywrite Strategy ETF applies a buy-write strategy to the bond market, generating additional income and reducing portfolio volatility. The LQDW ETF has underperformed compared to the iShares iBoxx $ Investment Grade Corporate Bond ETF, highlighting that yield alone does not guarantee stronger returns. LQDW can be a reliable choice for income-focused investors, offering a high-yield component in a diversified portfolio with a focus on reducing volatility.