Another 10% leading investment - SVOL

ETF that bets against the VIX and pays you cash!

Symbol: SVOL

Description: The Simplify Volatility Premium ETF (SVOL) holds a net short position to the Volatility Index (VIX) and option revenue to pay a healthy monthly dividend. The fund’s 25% short VIX exposure helps generate the monthly income while also making a small bet against an index (VIX) that decreases over time. Since volatility spikes (VIX increases quickly) can quickly raise the option premiums, the fund also buys deep out of the money (OTM) calls to provide a low-cost protection for the premium if those spikes occur. The result is a well-hedged bet against an index that decreases over time, while banking option premiums each month to distribute to shareholders.

Current Price: $22.21

Dividend Yield: 17.7%

Performance: Up 1.30% over the past month

-Flat (0.01%) over the past 3 months

- Up 11.76% over the past 6 months

- Up 5.04% YTD

Holdings: SVOL main holdings are a leveraged inverse position on VIX. This generates the income from the option profit. It also holds 3 and 4-month out of the money call positions on VIX as a cheap hedge. For instance, in May of 2023, it holds both $60 strike August calls and $60 strike September calls against VIX (currently at $17). If the VIX has a short term spike due to bad market/economy news, the value of these VIX calls will increase to offset the loss of value in short VIX position.

Opinion: SVOL is a unique income generation strategy that pays over a 17% annual yield with large principle protection measures. Having a passive inverse position to VIX has been a long term winner by itself. But pairing that with OTM call options really helps avoid many risks inherent to other income-producing assets. This makes SVOL a high dividend yield stock with a low risk of losing capital long term. Now, the index itself is going to trail the broader market, but it more than makes up with the monthly dividend. YTD, it has already paid 6% cash to investers plus the 5% increase in share price.

Personal investment: This is one of the 10% leaders in my portfolio. You really don’t need to try and time the market as this should hang out between $21 and $24 if managed properly. Buying the low $22s is a good spot (where it is now).

Summary: This is one of my favorite investments not only for the creativity used in its creation, but also at how it pays a high yield while offering market protection with the long term VIX calls. Market indexes like QQQ are up 26% YTD, so that means we will probably be in line for some price chop through the end of the year (market going up and down). That makes this a great time to begin income-producing positions like SVOL because it becomes a great investment when the market is running in place. I’m hardpressed to find a better income investment than one that pays a monthly dividend with an annual value of 17.7% while also significantly reducing the downside risk.

Fund Link: Simplify Volatility Premium ETF (SVOL)