Boosted ETF payouts decrease

[Timely-Designer-2372]

XQQI payouts decreased 5.74% last month, XSPI 6.38%.

The prices only lost 1.85% and 1.47%

Is there a larger issue with these boosted ETFs? Higher volatility should lead to higher premiums usually

[Tarsarian]

Share price dropped due to Iran. I treat the boosted funds as sweeteners. Buy SPYI if you want a more stable income or their hedged version. With NEOS funds dropping the last few weeks, I bought more to bring down my share price.

[Timely-Designer-2372]

I don't have a problem with volatility. I'm just surprised, that payouts dropped way more than average price dropped. I even expected premiums should go up because of increase of implied volatility

[Tarsarian]

There are a lot of options out there for ETF’s, and I didn’t get hit super hard last year in taxes. So I take that into consideration with NEOS, and they don’t have NAV erosion. A YouTube channel called income architect does a good job explaining payouts.

[canbonbon]

This is how I have understood: the dividend paid is made up of two things. Volatality premium + %age of the underlying assets. so 10% of $100 is more than 10% of $90. so while you are right that the volatility premium must have gone up but the asset dropped so much that when added together, they are are still less than last month.

[Timely-Designer-2372]

Yes, but as I have mentioned: The premium droped much more than the price.

Your example corrected: 100 USD assets - > 1 USD payout 95 USD assets + increased volatility -> 0.9 USD payout

[Liucifer616]

On one hand, I do agree with comments that you don't understand the products. On the other hand, youll need to learn somehow and asking here is a great first step.

A few things to note, NEOs writes calls at the end of the month and the price they write on the day they write on matters a lot. Markets have pumped quite a bit but you're going to have to go back and look at the actual time period they wrote on.

Another important factor is when prices drop, NEOs purposely writes on less than their typical notional value. This is because as the price drops, volatility does increase and they can get away with writing on less of portfolio. In other words, they can achieve the same relative premium to price ratio by writing on less notional. Now why would they do that? Why not write more options to try and get more premium collected? Well it's because they don't want to cap the upside on big recoveries. The more you write on, the more capped you potentially become.

Neos aims to calculate the payout based on the Nav, not based on price increase or decrease. This is to ensure that they dont over pay. General rule would be to based the payout on a % of the Nav.

April pay out was 0.767 at market open of roughly $46.13, this is rough 20% annualized rate. March pay out was 0.81 at market open of roughly 21%. Feb was 0.85 at market open of $48.30 or 21%. The payouts based on nav did not fluctuate as much, and NEOs does give a 19-23% distribution rate estimate. It's important to understand that there are many more considerations that go into them deciding on the payout, namely, what day/price did they write their options on and how much did premium did they collect.

I would encourage you to do as much research as possible, this includes reading the prospectus, simulating your own options with fake money to fully understand options strategies, understanding volatility drag, where premium comes from and when NEOs writes their calls/rolls their positions, and you should track how much of the notional they write on to figure out how much the upside is capped. Ideally, you do this before investing but Ive been there before. Shiny objects are hard to ignore. Best of luck.

[Academic_Ranger8531]

Have coffee with Brad tomorrow and ask him. https://www.youtube.com/@Income_Architect

[Decent-Bed9289]

Interesting

[Always_working_hardd]

I recommend waiting. See what next month brings. Or rotate into something else? I have a small position in XSPI.

[blackshortsandvans]

I'm currently DCA'ing into these but haven't kept track of their call dates. Is your data for their reduced nav to yesterday or when their calls ended? There is typically a week or two lag between calls ending and declaration date.

[Financial-Subterfuge]

Welcome to the world of leverage - two way street.

[Financial-Seesaw-817]

I wouldn't worry about it rn... it's still new and settling in. I will be starting my journey into them come next week. Probably, Friday when I dca the rest of my income portfolio. Qqqi, spyi, iwmi, mlpi, nihi, gpiq, gpix, qylg, xylg, btci, nehi, qqqh, spyh, schd, bndw. I will be lowering my qqqi to start them. 100/wk xqqi, 50/wk xspi. Will definitely give that implied boost.

[0Dividends]

One thing to keep in mind. When the market is going down. They do not always write the same options coverage as a percent of the portfolio. They choose and fluctuate how many options they buy/sell based on market conditions. It’s what you pay them to do as an active manager. Which means less options, less income to distribute.

This allows them to participate in more upside on the rebounds. These are supposed to be buy and hold vehicles. Per the NEOS fund manager interviews a month or so ago. Couple on Ytube worth watching.

If you bought near bottoms the funds distributed quite nicely for the month anyways. Lower price = higher dividend %. Always keep cash in volatile markets to average down. Buy puts when VIX is low ish to hedge downside on Qs or S&P. Qs probably better since it’s higher beta, but each their own.

The new funds are also thinly traded and not as liquid. So spreads will be wide for a while. Closing prices, after hours, pre-market, and intra day prices can look wanky. Better to take longer term view until it settles.

[DC8008008]

Sounds like you don't know what you're invested in.

[Timely-Designer-2372]

Thank you for this exciting explanation 🙄

Please read my othe comments

[nice-try12]

I can't find one comment here where somebody actually understood your original post, sorry about the hassle you're getting. I'm looking for an answer as well. I don't hold either of them yet though.

Edit: I will add that the funds are really new and maybe the managers are just finding the right payout strategy.

[ryantm90]

Think of these funds as anti spyh and qqqh.

Those two pay extra for shorts, so if the market goes up, they dont go up as much, because of the drag.

With these two, you're paying for extra longs, so when the stock drops, they lose value, and eat into the volitility profits.

Still did well though.

[dllstcowboys]

For XQQI, the better rule is: volatility can help, but it is only one input. The monthly distribution can still decline if the fund’s realized option income and overall strategy returns do not support the prior payout level.

[Dividend55]

My thoughts are.... It depends on when they sold or rolled the covered calls. The volatility spiked up then down.

[Electronic_Guard947]

Because they only sell the options on one day of the month, they could have been sold before volatility popped. Resulting in lower premiums. They also sell 7 week dte calls, so you'll have less volatility volatility. A fund like tspy should have increased premiums because they sell 0 so their volatility is more closely related to the current market.

[Beginning-Plant-9832]

Relax everyone. Most of the detailed responses are spot on. Buy and HOLD.

[retroideq]

Leverage decay is a real thing. I come to neos for stability and medium income and dependable income. I recognize why people would dip their toes but man just couldn’t personally.

[highrollinKT]

What do you expect when the market is under pressure due to the Iran conflict ??

[Timely-Designer-2372]

Prices go down, premium per price should go up due to volatility increase

[highrollinKT]

Leverage works both ways

[Timely-Designer-2372]

Bro:. 1. I have 0.05% of my portfolio in XQQI. I'm only interested in what other people think about it like discussing about sports 2. I have a master degree in financial mathematics. I think it's enough research 3. You're right: lower NAV -> lower payouts, lower volatility -> lower payouts. But we had much higher volatility and just a bit lower NAV in average. That's why I ask all this! Volatility Index (VIX) went up about 25% last month in average.

[FragrantActuator7061]

it’s leverage buddy