Selling Volatility Can Be Painful

It's been a rough go for the Tuttle Capital MSTR 0DTE Covered Call ETF (MSTK) since in listed last fall. It hasn't been much better for the older YieldMax version (MSTY).

If you add the distributions back in on testfol.io, MSTK is down 59% while MSTY is down 46%. The total return declines aren't that bad compared to Strategy's common stock which Yahoo shows down 52%.

Learning how to harness volatility as well as how not to do it has become pretty important to how I view things which is why we spend so much time looking at it here. Frequently, I talk about sifting through a lot to find something useful. That's what looking at funds like this is, sifting through things that would pretty clearly be very difficult to hold but there is information in watching how the crazy high yielders behave. 

Kind of related. Interesting idea, not being sarcastic, but getting hit in not quite a month of trading.

They filed for a whole suite of these but so far just this one and a gold/Bitcoin fund that has symbol ISBG which is down 25% in the same number of days. 

I sat in on a Webinar from WisdomTree about capital efficiency. They included this slide which we looked at a very similar slide a few weeks ago.

If you're interest in looking at that again, there it is but I had a another thought. Meb Faber Tweeted something about 60% S&P 500/40% gold looking an awful lot like plain vanilla 60/40. I couldn't recreate that but this is interesting.

Testfol.io can simulate certain things before when the respective fund actually started including DBMF which is a managed futures ETF. Backtesting managed futures this far back is pretty helpful. 

Managed futures looks more like intermediate treasuries (there is no simulation for AGG) than gold does until we get to late 2021. You can kind of see in the drawdown chart where managed futures worked relatively well when the internet bubble popped and the financial crisis which were both slow moving events, it got hit in the covid crash because that was a fast event and of course 2022 when it did fantastically well.

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