JEPI - JEPQ: Volmageddon 2.0 Fears Overblown

2024-04-23 01:26:32 ET

Summary

• JPMorgan Nasdaq Equity Premium Income ETF is one of the largest ETFs engaged in short-volatility bets.
• Many analysts and news sites have been warning about 'Volmageddon 2.0' in recent days due to the proliferation of option-selling funds like JEPQ.
• The risks of JEPQ being wiped out like the XIV are overblown, as JEPQ's buy-write strategy does not have the same risks as the traditional 'short volatility' strategies.
• Instead, investors should consider overvaluation in JEPQ's portfolio and the long-term underperformance of the strategy due to its 'capped upside/uncapped downside' nature.

Recently, I have seen many investment analysts and news outlets discuss the possibility of 'Volmageddon 2.0' (Figure 1)....

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