They're Here! Levered Derivative Income Funds!

Tuttle has an interesting filing for two different 1.3X levered covered call funds with the product name LIFT. One will track TSPY which is a 0dte covered call fund on the S&P 500 and the other fund being tracked is TDAQ which is a 0dte covered call fund on the NASDAQ 100.

Focusing on TSPY, this shows TSPY total return, then 1.3x TSPY total return and 1.3x TSPY price only.

Any fund that sells covered calls should not be expected to keep up with its underlying reference security on a price basis but might get close on a total return basis as the chart shows with TSPY. These are best thought of as products that combine the underlying reference security and short volatility of the underlying reference security which delivers a different outcome than just buying, in this case, SPY.

The total return of TSPY, a little bit behind SPY, is either sufficient for an end user or not. If not, then don't buy the fund. The 1.3x price only chart is not much different than the regular TSPY price only chart. The total return of 1.3x is a little more interesting if I am right about why Tuttle filed for these.

I think these are an attempt to try to get derivative income funds to track a little closer to the underlying. It doesn't look like price only at 1.3x leverage offers that opportunity so maybe these could be thought of as an attempt to try to dial this in to a smaller lag/drag. 

Let's see what happens with 1.5x TSPY which to be clear is not part of the filing.

Price return again gets left far behind and the volatility goes up. That may not be such a great combination. Leveraging up to 1.3x also shows higher volatility.

This is sort of a sifting process. Is there a path to solving some of the drawbacks of derivative income funds? There may not be but I think there is something out there, yet to be tried that would solve it. 

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