IEF - TLTW: Supercharged By High Volume Environment To 19.85% Yield
2024-02-08 08:47:42 ET
Summary
- The iShares 20+ Year Treasury Bond BuyWrite Strategy ETF is designed to offer returns similar to holding 20-year treasury bonds while adding income through writing monthly call options.
- This strategy aims to benefit when bond prices are stable, earning from both the yield of the bonds and the decay of the call options.
- TLTW has shown a significantly higher 12-month yield compared to the traditional iShares 20+ Year Treasury Bond ETF.
The iShares 20+ Year Treasury Bond BuyWrite Strategy ETF ( TLTW ) is meant to deliver a return commensurate with holding 20-year bonds and writing calls on these monthly. Selling a call caps the upside of bonds. Government bonds go up as interest rates go down. That means the capital appreciation of bonds rapidly increasing in value, when rates are cut, is cut off here. The fund performs well when bond prices are stable because of the yield AND the calls deteriorating in value as they near expiry and eventually expire. If interest rates go up, the fund loses a bit less money compared to a fund with similar bonds but no call-selling overlay. However, it is still likely to lose a lot of money if rates increase unexpectedly. Currently, the market isn't expecting interest rates to rise further....
TLTW: Supercharged By High Volume Environment To 19.85% Yield