SGOV - BUCK: Yield Enhancement Via Bond Futures

2024-06-10 12:31:42 ET

Summary

• BUCK ETF seeks to boost the yield on short-term treasuries through option strategies. The fund uses a combination of treasury bills and options on bond futures.
• BUCK has underperformed peers like SGOV (simple treasury ETF) over the past year.
• While lower risk, BUCK's option plays haven't delivered positive net results.
• HIGH ETF is highlighted as a possible alternative for investors seeking stronger yield enhancement.

Thesis

As risk-free rates moved higher starting with 2022, we have seen a plethora of short term funds trying to beat simple treasury ETFs. On one hand, we have short term bond funds which offer extra yield on the back of corporate exposure, in a different group we have seen CLO funds with quasi-zero duration, and thirdly we are witnessing a nascent cohort, namely short term funds with low risk options overlays....

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