HPYT writes covered call options on its portfolio, for up to 100% of its securities. The call option premium accounts for the much higher yield. In a sector rally, TLT will probably outperform as it does not have call option exposure at all. But in the interim, HPYT will offer a higher yield, certainly. But their focus is quite different overall because of the option strategy. The long term treasury market is quite volatile, and thus call options (which vary for the fund) can be quite lucrative because of this. It uses 'regular' options but with varying maturities and strike prices. Its portfolio can still benefit from lower interest rates as well, up to the point of its option exercise prices. For example, TLT is up 15.21% in a year, and these types of bond gains can also be reflected in the distribution yield of HPYT.
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