XYLD - Swap Options For Reducing Discount Risk And Not Sacrificing A Ton Of Yield
- In counter-cyclical investing, we want to buy CEFs when discounts are wide and sell them when discounts are tight.
- The problem we run into is that when we swap, we give up the upside of the NAVs should the bull market continue. We also give up higher income streams.
- The options below get as close as possible to CEF yields without the discount risk.
- In the case of covered call, preferred, and muni CEFs, we can get very close to or equivalent yields without the discount risk. PFFA is a great option at the moment.
- Investors should consider selling premium funds in Covered Call and Preferreds and going to XYLD and PFFA, respectively.
For further details see:
Swap Options For Reducing Discount Risk And Not Sacrificing A Ton Of Yield