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First-Ever Zero-Day-to-Expiry ETF (QQQY) Gets a Good Start
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Defiance ETFs, known for their thematic ETFs, launched the novel The Defiance Nasdaq-100 Enhanced Option Income ETF (QQQY - Free Report) last week. It has accumulated nearly $5 million in AUM within a week of its debut.
Touted as a revolutionary stride in high-income ETF investing, QQQY is the first-ever ETF to harness Zero-Day-to-Expiry (0DTE) options as a strategy to bolster monthly income. Notably, 0DTE refers to options that have no days left to their expiry, meaning they are set to expire on the very day of their trade.
QQQY in Focus
The new ETF is the first put-write fund using 0DTE to seek enhanced income for investors. It aims to achieve consistent and outsized monthly yield distributions for investors coupled with equity market exposure to the Nasdaq-100 (read: Inverse ETFs to Play If Nasdaq Slumps Ahead).
QQQY, an actively managed ETF, seeks enhanced income, comprising treasuries and Nasdaq-100 index options. The strategy’s objective is to generate outsized monthly distributions by selling option premiums on a daily basis. The fund uses daily options to realize rapid time decay by selling in the money puts with 0DTE.
The new ETF comes with an expense ratio of 0.99%.
How Will it Fit in a Portfolio?
The ETF could be an intriguing choice for investors seeking exposure to the increasingly popular day trading options strategy. In the dynamic world of finance, the 0DTE options strategy has emerged as a prominent talking point among traders and investors. This strategy pertains to options that expire on the day that they are traded.
The craze for fast-expiring options has soared to about $1 trillion lately. They account for 43% of overall S&P 500 options volume, up from 21% in 2021, according to Cboe Global Markets. One driving force is their deep market liquidity. The cost-effectiveness of trading these options, priced at 5 cents per tick compared to S&P futures at 25 cents, makes them attractive (read: Time for Low-Beta ETFs?).
Several factors are contributing to the allure of 0DTE options. These tend to be cheaper than longer-dated options, making them attractive to traders aiming to profit from short-term market movements. Due to their daily expiration, there is a constant supply of fresh 0DTE options, often resulting in high liquidity and tighter bid-ask spreads. Traders can potentially achieve higher leverage, amplifying potential gains (and losses). With only hours to expiration, there are fewer variables (like major news events) that can impact the option's price.
ETF Competition
The new product is expected to get a first-mover advantage as it is the only pure-play ETF with the hottest options trade. However, 0DTE isn't the only new investment product tapping into the demand for exposure to options.
Launched in 2020, JPMorgan Equity Premium Income ETF (JEPI - Free Report) is immensely popular right now, with an AUM of $29.6 billion. It generates income through a combination of selling options and investing in U.S. large-cap stocks, seeking to deliver a monthly income stream from associated option premiums and stock dividends.
Bottom Line
It will not be difficult for the new ETFs to garner sufficient investor interest amid an explosion of interest in zero-day option trading and generate decent total returns net of expense ratio. Investors, as it is, are looking for exposure to stock investments with an income stream.
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First-Ever Zero-Day-to-Expiry ETF (QQQY) Gets a Good Start
Defiance ETFs, known for their thematic ETFs, launched the novel The Defiance Nasdaq-100 Enhanced Option Income ETF (QQQY - Free Report) last week. It has accumulated nearly $5 million in AUM within a week of its debut.
Touted as a revolutionary stride in high-income ETF investing, QQQY is the first-ever ETF to harness Zero-Day-to-Expiry (0DTE) options as a strategy to bolster monthly income. Notably, 0DTE refers to options that have no days left to their expiry, meaning they are set to expire on the very day of their trade.
QQQY in Focus
The new ETF is the first put-write fund using 0DTE to seek enhanced income for investors. It aims to achieve consistent and outsized monthly yield distributions for investors coupled with equity market exposure to the Nasdaq-100 (read: Inverse ETFs to Play If Nasdaq Slumps Ahead).
QQQY, an actively managed ETF, seeks enhanced income, comprising treasuries and Nasdaq-100 index options. The strategy’s objective is to generate outsized monthly distributions by selling option premiums on a daily basis. The fund uses daily options to realize rapid time decay by selling in the money puts with 0DTE.
The new ETF comes with an expense ratio of 0.99%.
How Will it Fit in a Portfolio?
The ETF could be an intriguing choice for investors seeking exposure to the increasingly popular day trading options strategy. In the dynamic world of finance, the 0DTE options strategy has emerged as a prominent talking point among traders and investors. This strategy pertains to options that expire on the day that they are traded.
The craze for fast-expiring options has soared to about $1 trillion lately. They account for 43% of overall S&P 500 options volume, up from 21% in 2021, according to Cboe Global Markets. One driving force is their deep market liquidity. The cost-effectiveness of trading these options, priced at 5 cents per tick compared to S&P futures at 25 cents, makes them attractive (read: Time for Low-Beta ETFs?).
Several factors are contributing to the allure of 0DTE options. These tend to be cheaper than longer-dated options, making them attractive to traders aiming to profit from short-term market movements. Due to their daily expiration, there is a constant supply of fresh 0DTE options, often resulting in high liquidity and tighter bid-ask spreads. Traders can potentially achieve higher leverage, amplifying potential gains (and losses). With only hours to expiration, there are fewer variables (like major news events) that can impact the option's price.
ETF Competition
The new product is expected to get a first-mover advantage as it is the only pure-play ETF with the hottest options trade. However, 0DTE isn't the only new investment product tapping into the demand for exposure to options.
Launched in 2020, JPMorgan Equity Premium Income ETF (JEPI - Free Report) is immensely popular right now, with an AUM of $29.6 billion. It generates income through a combination of selling options and investing in U.S. large-cap stocks, seeking to deliver a monthly income stream from associated option premiums and stock dividends.
Bottom Line
It will not be difficult for the new ETFs to garner sufficient investor interest amid an explosion of interest in zero-day option trading and generate decent total returns net of expense ratio. Investors, as it is, are looking for exposure to stock investments with an income stream.