ETF Battles: Watch Nasdaq QQQ Covered Call ETFs, it's QQQI vs. QDTE!
well ETFs that use synthetic income derived from call options have exploded in popularity and today's ETF battle is a head-to-head matchup between covered call ETFs from NEOS and roundhill well who wins the battle find out right after this well cordial welcome to all you're watching ETF battles I'm Ronda Lei if you're new to the welcome aboard we're in season 6 hit that subscribe button join our community and if you got a ETF battle suggestion hit us up in the comment section below with your ETF ticker symbols we can do double triple and quadruple headers you can also send us your requests on our X feed at etfguide uh don't forget to visit the description section below I've got links to our program judges and links to our program sponsor Direction who has been expanding their leverage DTF lineup uh they've got a mess of uh single stock ETFs which they have been increasing that menu so lots of choices they recently just added a leverag the ETFs on Palante tier Technologies and birkshire hathway so be sure to check out direction.com and uh there's other goodies down there in the description section um so don't miss that so today's ETF bout was requested by a viewer named Brian Morrison and uh it's between QQQ I from NEOS and qdt from roundhill and these are both High income uh ETFs uh focused on uh the underlying index as NASDAQ and so we're going to take a look at these income funds and compare them now remember they're using what's called synthetic income which is from specialized option strategies that's a lot different than let's say dividend income from a corporate uh payout from a company our judges are going to probably elaborate on that judging today's contest is a Duo extraordinaire we've got Dave Kines with ETF portfolio management and Athan feras with Bloomberg judges welcome back great to see you David Ron nice to see you Ronnie D Athan battle on yeah so our four battle categories are cost exposure strategy we've got performance and yield combined and then uh mystery is the category where our you are Judges can pick a certain factor or thing that you think is crucial to today's contest I've got the scorekeeping duties at the end of the program we will declare an overall winner none of the battle outcomes we do on this program are ever predetermined or known in advance by myself or our judges the first categories cost let's start with aan please get us started uh yeah happy to so you have qqi which is uh from NEOS and you have qdt which is from roundhill uh that one is 95 basis points the one from NEOS is 68 so it's it's a pretty significant difference so we'll get into like the yield that they pay out and and that's much different but theyve both both been pretty successful in a very short amount of time they're they're pretty new products uh they both have over 600 million in them they both trade quite a bit um so obviously this is a really popular category like you were alluding to synthetic income uh it's it's taken hold very very quickly but the difference in the expense ratios is Meaningful enough that I would just give this to qqi um it's it's 68 versus 95 so that that's a pretty big difference um but notice they are more expensive than a typical you know kind of Vanguard typee ETF but uh I will give this one to uh the NEOS qqi that's a strong start thank you Athan Dave you're up next how do you see it when it comes to cost Well Ron you know how much I love leverage ETFs and I've been begging you for a leverage single stock ETF battle for quite a while and yes you have and what do you give me Ron covered calls covered calls Ron okay well you know I'm a team players so let's do it QQQ is almost 30 basis points lower cost than qdt and in this space that may be material so I agree with aan and give the cost win to QQQ I you are correct but the underlying index is the triple Q's which refresh my memory that's your area of expertise you're a you're a triple Q NASDAQ 100 proponent so that's why I pulled you in on to this but thank you very much for that analysis that takes us to next to the performance I'm I'm sorry not performance exposure strategy I'm jumping ahead so let's take a look at exposure Dave you're up give it to us for exposure These funds are both focused on growth through the nasda 100 with extra income and somewhat lower risk profile than passive Equity indexing and at etfm for this type of exposure we typically employ the incoming growth investable Benchmark port folio which is a balanced mix of stocks and bonds with a dash of the top cryptocurrencies we also do not allocate to covered call strategies because our focus is on maximizing investor upside with risk control often we prefer to use leading leveraged ETFs with an active position rotation process to both control risk and to allow for income so for exposure in these covered call battle funds I call it a split decision Athan you're up next how do you see it when it comes to exposure between these two ETFs yeah they're both um the same but different and what I mean by that is they're obviously both uh tracking the the cues right um they're they're writing out of the money call options on the cues but it's with a you're going to get a little bit more downside protection and you're going to miss out on a little of the upside right and that's sort of the cost because clients are always ask or they don't understand well yes you'll get this yield from it what's the cost of getting that yield and that is giving up some of the upside but the main differences between these two is the Neo's product will do monthly uh option writing and the roundhill will do daily so because of that they're able to punch out a much higher yield so just something to keep in mind that that the scheduling is different um so you you you could potentially give up more upside with the roundhill product um you know it I'm going to have to go with what David said too I think it's a split decision I think you're getting the same exposure just like what preference you want do you want um a week and also the other thing I'll mentioned ronhill pays out weekly too so the income is paid out weekly versus monthly for NEOS so it's just more of a matter of preference it's it's too close to cost I'll probably um also do a split decision on the on exposure strategy all right well that takes us next to the next category which is a performance and yield and aan you're still up so break it down for us yeah I was s let's start first with yield right and I was mentioning because roundhill does it on a uses daily options they able to punch a much higher yield so they have a yield of about 30% annualized qqi uses monthly they have about half of that right so only about 14% yield um and this is also going back to the expense ratio you do find that the ones that are able to generate a higher yield do charge more so just something to think about yes the roundhill product was 95 basis points but it pays a much higher yield um performance they both pretty new um so if since they launched and just because the cues have been a little choppy they' pretty much just match the performance of the cues uh if you wanted to get a long-term look how this strategy would have done just look at jeq which is a JP Morgan covered car product it's been out there a little bit longer just to give you an idea of like how this would perform over the long term um if if you still believe the qes are going to go up and the Market's going to go up you're going to lag on the upside just you have to keep that in mind with these types of strategies um but because this is going towards an income oriented investor um and someone who you know is going to be focused on that roundhill just punches so much yield from that product and so that's really attractive to somebody so because of that yield kicker and they're doing it on a daily basis um I'll I'll give the performance and and the yield winner to qdt Dave you're up next how do you see it when it comes to Performance and yield on performance these two funds are relatively new as aan mentions so this data chart shows over the past four years jei je and xyld two older covered call funds both materially underperformed the S&P 500 however jeppy was successful in significantly reducing risk in the crash of 2022 so for performance here I call it a split decision and note in this trailing four-year period SP XL strongly outperformed tqqq so as much as we do typically use tqqq which is three times NASDAQ 100 exposure there are times when we prefer spxl for three times S&P 500 instead well that takes us to the mystery battle category this is where our judges can name a certain factor or thing that they think is crucial to today's contest so Dave what is your mystery battle category and which of these uh ETFs wins it well my mystery category is always position size and when it comes to covered call funds my position size is zero now given the asset flow there is certain value and opportunity for some investors in covered call strategies however at etfm we prefer to reduce risk and to allow for income through active risk controls on leading leveraged ETFs so I call the position size category for these battle funds a split decision Athan you're up next how do you see it when it comes to uh your mystery battle category what is and which of these ETFs wins it one of my favorite categories is taxes the tax man and investors have to be cognitive of price return versus total return right and so essentially if you look at both qqi and qta over the common Inception date they almost performed exactly the same they're at about 20% but QD most of that return came from income versus qti which was balance between price and income now assuming you're not in an IRA just something to keep in mind because it's all income you're paying taxes on that right versus some versus price return you won't pay that until you sell it you can't avoid that with income so just keep in mind that from a from a performance perspective 2te was down on price but it was up in total return which means all of that came from income you're paying tax and all that income so just be in mind of these super yielders they're very they not the most tax efficient funds it's just something to keep in mind that where your return is coming from Price or to return or income uh you're going to be hit with a tax bill that's unavoidable whether it's an ETF or any type of fund structure so because of that QQQ I is more efficient because it it it it it doesn't quite necessarily only rely on the um income portion of it um so I will just taxes and the contracts they're using the more tax efficient in qqi so just from a tax Edge uh the winner would be that mystery batter category I'd give it to qqi yeah great point thank you so much Athan and it really depends too how you're using these products right so if you're using it again as Athan said in a tax deferred or tax-free retirement account then the taxes aren't so much a concern right because you're either deferring or eliminating those taxes if it's like a Roth IRA or Roth 401k but then again taxes are a big deal if you're using these products in a taxable brokerage account then you have to really think about that so great point Athan so that brings us to the part of our program where our judges can give us their overall battle winner and uh aan you're up so give it to us yeah it's it's a really close one and I don't want to cop out by saying it's a split decision but there there's they're both the same but they're so different just because of what is more important factor to you if it's income and you just want to punch out the most possible it's qdt but qqi which also is a little bit more tax efficient uh they do give you some downside protection uh it's really close uh I don't know if I could pick one I'm going to have to go with a split decision here and just clarify real quick aan the payouts on these what is it what is the frequency of the distributions is it both the same on these they're a little bit different qdt the roundhill one will be on a weekly basis qqi will be on a monthly basis so again if that's important to you frequency of the distribution uh you know just something to look at and we're noticing more of the new ETFs that are coming out are going to a weekly uh payout so people seem to want the income much faster whether they want to reinvest it or do something with it much quicker so uh they do have different payout schedules all right thank you for that clarification Dave you're up with your final chance to weigh in with your overall battle winner give it to us Ron to recap this covered call snoozer we don't allocate snoozer what are you talking about I'm still up and so is aan and we haven't even had our third capuccino we don't allocate to covered call strategies at etfm we prefer to employ active risk controls on leading leveraged ETF and over the past 15 years this chart shows spxl returned 53 times your money which was eight times the return of the S&P and since spxl did fall by 57% in 2022 active risk controls may be critical so for somewhat lower risk Equity exposure I give the win to the balanced incoming growth investable Benchmark portfolio or to wildcard ETF spxl with ETF PM's active risk controls for added safety and in the absence of those options here I give this covered call battle a Ronnie D favorite Split Decision all right well our judges have weighed in and according to my final battle scorecard this is a split decision between QQQ and qdt and of course we had a wild card comination with spxl from Dave and each of our judges made their uh arguments of course Dave favoring leverage with risk controls as his favorite way of uh of approaching this sort of investing of course uh that's uh you know with his philosophy of investing and he does have a uh as he mentioned there a benchmark um income what did you call it Dave the incom and growth investable Benchmark right exactly which it has ETFs that are uh con underlying constituents of that that Benchmark um aan making his point and I think he raised some great points be aware of taxes how are you using these two ETFs they are not the most tax efficient in a taxable uh account so if you're using them in that setting well you're going to pay a load of taxes because these are heavy on the income and then also too the as mentioned QQQ I is paying out monthly income whereas Q qdt is paying out weekly just because of the fact that both both funds while using a similar strategy the frequency of those distributions and the frequency of the underlying options is different so you'll have more frequency or higher frequency of payments the Weekly's with qdt and uh monthly with Q qqi so that could be a consideration for some of you income investors that want to get your money as soon as possible right so that's again something else to keep it mind great job to both of our judges for breaking down today's high income High steroid Tech ETF contest we couldn't have done it without you yeah this is great thanks Ron thanks Athan happy trading everyone well be sure to visit description section below for links to our program judges also we've got a link to our program sponsor Direction and uh lots of good stuff down there thanks to Brian for this episode's ETF battle suggestion very good what what about you which ETF matchups would you like to see on the next episode send me your ticker symbols in the comment section below or on our X feed at ETF guide I'm Ronda legi thanks for watching ETF battles we'll see you on the next episode
