2024-07-08 03:05:01 ET
Summary
- Major rallies in long-term Treasuries that cause TLTW's covered call strategy to underperform are rare.
- iShares 20+ Year Treasury Bond Buywrite Strategy ETF offers an attractive monthly distribution with a yield above 10%.
- The Fund utilizes a covered call options strategy with the iShares 20+ Year Treasury Bond Buywrite Strategy ETF as its core asset to enhance income.
- TLTW has outperformed TLT since its inception in 2022, with the covered call strategy proving most effective in range-bound trading environments.
The iShares 20+ Year Treasury Bond BuyWrite Strategy ETF ( TLTW ) attracts a lot of attention from investors, likely due to the fund's sky-high yield.
TLTW pays distributions monthly with the fund is scheduled to pay out $0.276948 on July 8th; if we annualize that payout, TLTW's indicated yield is around 12.9%. The 12-month yield - the sum of all distributions over the past 12 months divided by the current price of the ETF -- is about 15.8%.
I suppose it's only natural to wonder how an ETF with a name that implies it buys long-term Treasuries (US government bonds) could possibly have a yield in the double digits. After all, benchmark 20- and 30-Year Treasuries haven't offered a yield much over 5% at any time in recent years:
Indeed, according to Bloomberg , the last time the 30-Year Treasury offered a yield north of 10% was October 1987....
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TLTW: A Buy Until Recession Imminent