Thanks for the post! It’s very interesting to see this topic discussed here.
I don’t have much experience with options yet—something I plan to change—but I do use a covered call ETF (QYLD) to save time. I mainly use it as a substitute for savings accounts or bonds due to the low interest rates, specifically for cash I want to keep liquid for short to medium-term investments.
Since I don’t want to hold everything in USD and prefer some exposure to CHF, I am looking for an alternative. I recently came across the Vontobel Enhanced Covered Call Switzerland ER Index. What do you think about this one?
That said, it would probably be more profitable to gain more experience and trade the options myself.
Huh – I don’t really feel qualified to answer, but instinctively I feel that any options based product is mainly for the benefit of the issuer of that product, i.e. Vontobel in this case.
Think about it: they don’t issue their products for altruistic reasons, they want to make a profit and ideally have the customer bear the risk. Nothing bad about it (from a Vontobel shareholder perspective), just simple business acumen.
If you, as an investor in that product, make profit along the way, cool – in fact, great: you might even promote that product among your social circles. More fees for Vontobel.
However, the primary goal for Vontobel is still to hedge risk as the issuer of the product and to make profit as the issuer of the product.
If I myself were to go into trading options – oh, wait … – I’d probably myself get my hands dirty trying to understand what this business is really about, who takes on what risk and how things play out in the short and in the long term, during quiet markets, during volatile markets, etc.
No evidence, I am afraid. Just my gut feeling based on a few burnt fingers and some lucky successes for now.
Maybe others will jump in with a more data driven reasoning (@larix.aurea).
Last but not least: don’t trade options on Swissquote. The fees only benefit Swissquote.
(Clearly I am there not a shareholder of Swissquote or an index that holds them or I’d say the opposite)
Not necessarily. According to my understanding, these products often represent a complicated combination of different options, and compiling such a combination yourself might be expressive/cumbersome. It’s somewhat similar to ETFs. The difference from ETFs is that few people actually need such combinations
Thanks for the feedback. Of course the issuer/emmittent is going to make a profit, but I don’t really see a huge difference there compared to classic ETFs, funds, or other products (at least not yet).
I’ve had good experiences with QYLD so far: monthly premiums, paying the TER, and slight capital appreciation – obviously not comparable to the underlying assets, but that’s not the point anyway.
I find some alternatives, e.g., the ZSMICZ from Zürcher Kantonalbank, which is another certificate. Unfortunately, these aren’t offered by Interactive Brokers. In general, I find that some of these Swiss products are missing there.
Yeah, I often hear everyone complaining about fees on Swissquote, so I’ll check out Saxo sometime to see if the situation is better there.
However, trading options yourself is probably still the way to go, though.
How many decades has that been again? Well, QYLD data reaches back to 2013-12-13 on testfol.io. Severly underperforms QQQ in Sharpe and CAGR, and strictly so for anything 3 years or longer.
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), doesn’t mean the product is necessarily bad.