QYLD: Sharp Narrowing Of Yield Spread And Alpha Generation

Summary

  • The Global X NASDAQ 100 Covered Call ETF follows a covered call strategy on the Nasdaq 100 Index to collect premiums and provide high current income distributions.
  • My earlier article analyzed its yield spread, showing that the yield spread was close to the widest level of the historical spectrum and signaling low risk in the near term.
  • Indeed, the yield spread has sharply narrowed since my last writing due to the combination of QYLD price appreciation and the rise of treasury bond rates.
  • Given the changes in macroeconomics, this article reassesses the yield spread and also describes an alpha generation method based on the yield spread.

Yield spread, the difference between stock returns and the concept of return on fixed income, wooden cube with the word Spread.

Sviatlana Zyhmantovich/iStock via Getty Images

Thesis

The Global X NASDAQ 100 Covered Call ETF (NASDAQ:QYLD) follows a covered call strategy on the Nasdaq 100 Index to collect premiums and provide high current income distributions. The fund provides a very appealing

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Sensor Unlimited is an economist by training with a PhD, with a focus on financial economics. She is a quantitative modeler and for the past decade she has been covering the mortgage market, commercial market, and the banking industry. She writes about asset allocation and ETFs, particularly those related to the overall market, bonds, banking and financial sectors, and housing markets.

Sensor Unlimited contributes to the investing group Envision Early Retirement which is led by Sensor Unlimited. They offer proven solutions to generate both high income and high growth with isolated risks through dynamic asset allocation. Features include: two model portfolios - one for short-term survival/withdrawal and one for aggressive long-term growth, direct access via chat to discuss ideas, monthly updates on all holdings, tax discussions, and ticker critiques by request. Learn More.

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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