TLTW ETF

TLTW's high yield (15.34%) and effective rolling method make it an attractive investment, despite potential risks from sudden TLT price increases. In my opinion, is a good time to accumulate TLTW as a hedge for fixed-rate portfolios due to the current macroeconomic scenario and yield curve steepening. The steepening yield curve and ongoing Fed rate cuts suggest long-duration Treasury yields may not decrease significantly, making TLTW a strategic addition.

TLTW invests in long-term treasuries and sells covered calls on its holdings. The fund's high duration and covered call strategy result in substantial income but also consistent capital losses and distribution cuts. Its 14.9% distribution yield and potential outperformance during stable or slightly declining interest rates make it a buy despite significant risks.

Long-term Treasury bonds are performing well with the possibility of a rate cut cycle, making exposure to them beneficial. The iShares 20+ Year Treasury Bond BuyWrite Strategy ETF offers enhanced income through covered call options. TLTW provides higher income compared to traditional Treasury bonds, with potential for outperformance if rates remain stable or decline.

The TLTW ETF is a great way to get income (until it isn't), under the current rate conditions. TLTW features a 15.5% monthly dividend from its covered call selling, a very reliable income source due to the volatility of TLT. TLT should also be part of the core holding to build wealth in a possible rate decline cycle.

Major rallies in long-term Treasuries that cause TLTW's covered call strategy to underperform are rare. iShares 20+ Year Treasury Bond Buywrite Strategy ETF offers an attractive monthly distribution with a yield above 10%. The Fund utilizes a covered call options strategy with the iShares 20+ Year Treasury Bond Buywrite Strategy ETF as its core asset to enhance income.

iShares 20+ Year Treasury Bond Buywrite Strategy ETF offers exposure to 20-year treasury bonds and higher income through call options. The TLTW product captures volatility premium and coupons while giving up on potential price rallies. The yield on the TLTW ETF has decreased due to lower volatility, and future call selling may result in lower returns.

The iShares 20+ Year Treasury Bond Buy-Write Strategy ETF has not performed well compared to TLT since long rates peaked in October 2020. As long rates moved lower from their October 2023 highs, TLT outperformed TLTW by a factor of 3x. TLTW is hampered by the low implied volatility of TLT and the systematic strategy it employs to write covered calls.

"Investment products" offering double-digit yields, such as buy-write or option strategy ETFs, are almost always unsuitable for individual retired investors. The iShares 20+ Year Treasury Bond BuyWrite Strategy ETF has a high yield, but it is not an actual dividend but a return of capital. Today, TLTW's accurate dividend yield is 3.5%. Any gains after that are from option premiums, which must be reinvested to maintain a steady capital base.

TLTW's buy/write strategy has led to underperformance, with TLT returning 14% compared to TLTW's 5% since October. This is because TLTW's monthly returns are capped. Modeling long-term yields as short-term yields plus term premium, the 10-year yield has recently reached neutral and is unlikely to decline further. In the long-run, long-term yields are expected to rise due to persistently large government deficits swamping demand for treasuries.