JEPI - 3 Reasons I Prefer JEPI To JEPY

2024-06-07 07:59:37 ET

Summary

• JEPY is a relatively new fund with a strategy quite similar to those of covered call ETFs.
• It offers investors a massive, unsustainable 55.4% distribution yield. Share prices will almost certainly decline long-term, as they have since inception.
• I believe JEPI to be a stronger, more balanced, sustainable choice.

The Defiance S&P 500 Enhanced Options Income ETF ( JEPY ) invests in treasuries and sells daily S&P 500 put options. Doing so is functionally equivalent to investing in the S&P 500 and selling covered calls, a more common, well-known strategy. Doing so results in significant option premiums and distributions for shareholders, with the fund yielding 57.1%. It also significantly limits potential capital gains, ensures long-term capital losses, lower share prices and distributions....

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