High-yield ETFs - why take risks?

Equities Lab said:
In theory JEPI is supposed to be a bond fund, but looking at the stock price versus some other bond ETF's, it certainly looks to have more equity-like performance. Not sure that that matters much, but it is worth keeping in mind if you are using it as a hedge against an uncertain market.
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Thanks for posting.
  1. What tool is this?
  2. Why are you backtesting ticker "IEP?" (Icahn Enterprises)? What does this have to do with JEPI? Typo?
  3. What is "screener"
  4. Where is JEPI on this chart? I don't see a line in the key.
  5. I don't see any dividend payments for IEP; note that JEPI is known for paying a meaty monthly dividend, resulting in a fat total return of over 11%
 
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I am a dodo -- I used the wrong ticker! IEF was what I was looking for. The ticker I wanted was IEF -- the 7-10 year treasury ETF. Here's the replaced picture.
upload_2023-6-7_23-57-16.png

The green line is JEPI, and the S&P500 is the brown line. The "Screener" in this case happens to be the one that matches only JEPI. It could be something more complicated, such as high piotroski, or good technicals, or whatever.
The tool itself is Equities Lab. I'm the CEO of the (pretty small) company that sells it as a SaaS offering. It does backtesting and stock screening, on US Equities, using Morningstar data.
 
JEPI is not a bond fund, it is a call writing fund. I think it is actively managed and writes calls against certain equities in the index. So I imagine it does best in a volatile but sideways market where the IV is large. I think the largest dividend is probably when the index drops with a spike in the VIX. In a low VIX market with a rising index it will under perform SPY.

The most amazing call writing ETF (actually ETN) is USOI (Credit Suisse X-Links Crude Oil Shares Covered Call ETN). It has a trailing 12 month yield of 40%. Of course its probably due to the collapse of oil prices since the Ukraine invasion. Between May 2022 & July 2022 the dividend payout was $13.40 or about 12% in 3 months. The last 6 months the yield is about 14% so 25-30% for this calendar year.
 
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It’s not as straightforward as you have described it.
Usually the high yield ETFs, as any other high yield securities, are too risky. In the ETFs realm I think you can see such yield percentages on real estate ETFs. And you can imagine the robustness of those ETFs by yourself.
More stable ETFs, Vanguard for instance, is negative YTD. So this concept has some weak points for sure.
 
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