Quote:
Originally Posted by opendoor
Yeah, I mean there's a place for those things and it's obviously up to each investor what they want to do. But in the interest of accuracy, I don't think it's correct to characterize it as something you can just buy, collect the premium, and not worry about the direction of the market. There's a reason why Global X lists it as a high risk ETF while their index funds are medium risk.
The premiums from selling calls can help in a sideways market, but in the long run, those things usually perform poorly and they really don't have the downside protection that you'd think. I mean, look at ENCC's historical chart; from its inception in 2011 to the end of 2019 (so excluding COVID), its value dropped by about 85%. And even after accounting for the distributions, $10K invested at the start was only worth about $3.5K by the end of 2019. Whereas $10K invested in a CAD S&P 500 ETF in 2011 would've been worth about $30K by 2019.
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To be clear, I’m saying that’s how *I* feel about it, not characterizing the nature of the investment itself. It’s such a small amount invested that I don’t really care. Like, it’s $5,000, if the thing keeps doing what it has done for the last few years, it should generate ~$700 in dividends which will easily cover the small price fluctuations it has seen (and still $200 more than if it drops to its lowest traded value in that time). If it drops below support levels, then I’ll consider changing it up. It certainly isn’t a long-term play, definitely wouldn’t tell someone to invest their retirement in it. 90-10… 90% in safe stuff, 10% max for risky stuff and bullsh-t meme stocks.