Q: Hello Peter and the 5i Team,
With China apparently selling vast amounts of US Treasuries, which in turn has caused yields to rise dramatically, resulting in a corresponding drop in price of this ETF, I'm concerned that an ETF like HPYT won't be able to mitigate the losses, even with its covered-call strategy. Since HPYT is scheduled to pay its distribution today, I'm patiently waiting to determine if my recent steep losses will be somewhat reduced by the distribution. I'm seriously considering getting out of HPYT entirely due to the unintended consequences.
Am I correct in my thinking? I don't have a lot of experience with ETFs of this type.
Thanks as always for your guidance.
With China apparently selling vast amounts of US Treasuries, which in turn has caused yields to rise dramatically, resulting in a corresponding drop in price of this ETF, I'm concerned that an ETF like HPYT won't be able to mitigate the losses, even with its covered-call strategy. Since HPYT is scheduled to pay its distribution today, I'm patiently waiting to determine if my recent steep losses will be somewhat reduced by the distribution. I'm seriously considering getting out of HPYT entirely due to the unintended consequences.
Am I correct in my thinking? I don't have a lot of experience with ETFs of this type.
Thanks as always for your guidance.
5i Research Answer:
HPYT invests in long term treasury bonds (US) and sells call options against them. Long bonds...