JEPQ - JPMorgan's Equity Premium ETF: QQQ With Less Risk
2024-06-26 11:48:24 ET
Summary
- JPMorgan's Equity Premium ETF goes long the NASDAQ-100 while writing covered calls as a form of yield enhancement.
- The NASDAQ-100 is a classic example of an asset that could use a little yield enhancement, as it has only a 0.5% yield!
- Covered call writing limits capital gains, but in an overheated market, it can serve as a prudent hedge.
- In recent articles, I've been writing about increasing risk management on big tech stocks, through diversification, protective puts, and other strategies.
- In this article, I make the case that the JPMorgan Equity Premium ETF manages the risk in big tech well while retaining some of the returns. It may outperform if the QQQ trades sideways--sideways trading or moderate gains are ideal here.
A recent theme in my Seeking Alpha coverage has been, "How do you keep big tech exposure in your portfolio while minimizing the risks?" The big tech party has been going on for a long time, so it's only natural to want to hedge your bets a little. So, in recent articles, I recommended various strategies that could be used to participate in the high returns being earned by big tech companies, while also hedging against, or diversifying away, some of their risks. These strategies included:
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Buying protection on especially popular, big tech names.
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Diversifying across multiple sectors with index funds .
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Avoiding leveraged bets on big tech .