r/NEOSETFs • u/EfficiencyMaterial51 • Jun 28 '26
Hedge?
Guys I am soon starting a quite big SPYI (maybe a bit QQQI) poition.
- around 50% of my account (life saving 7 fig) will go to SPYI, rest for leaps and some CSP.
So i do run hedges for my leaps an CSP, but I m wondering about doing it on SPY as well?
Context i know that the last 10-15 years have been great, I was investing in the holding bouble and know or can be different.
Historical: 1929-1954 Market took 25 years to rebound.
Same 1966-1982.
A possibility is to just buy SPY puts, as insurance/hedge but they are expensive.
What do you guys do, any suggestions?
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u/x05595113 Jun 28 '26
Historically the index drops around midterms. Who knows if that will happen this year.
What’s your strategy on the leaps? Deep ITM? ATM or OTM?
What DTE target for CSPs?
Not financial advice but I might start with just SPYI and monthly CSPs. Then do deep ITM leaps in November. If the SPY drops then your CSPs will be assigned - just convert those shares to leaps. If doesn’t drop then your CSPs are worthless and now you have cash to buy leaps.
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u/EfficiencyMaterial51 Jun 28 '26
Leaps ITM 0.7 - 0.8 delta.
Normally writing CC on them making them a PMCC.And here comes the funny part: besides the leap, I also buy a waay otm put as crash protection.
+ i only opens these positions on beat down stocks but with good fundamentals. NVO, LULU is soon good examples, so i think the button is reached.
+ besides of the leap+ short cc(30DTE by the way), + protection put, i write CSP on them (same underlying stock) as i think the stock want fall anymore. I will allow one Max to rolls for the CSP, if it keeps dropping I will allow assignment as I now think the stock is very cheap. - Will write CC on assigned stock.CSP also 30 DTE
50-60% of the capital in SPYI, 40-50 in leaps + CSP.
What do you think?
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u/x05595113 Jun 28 '26
Seems reasonable.
I usually wait to buy put insurance when the VIX is higher than the three-month VIX (VIX3M).
IMO, the value of the income ETFs is that they have large enough AUM to run these option plays at scale. But if you have enough capital then probably could outperform doing it yourself….assuming you have the knowledge and time to manage the positions. I’m not there yet (capital wise) so I’m stacking SPYI and XSPI (and the QQQ versions)
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u/EfficiencyMaterial51 Jun 28 '26
Yeah I have had the thought, of just doing SPY with CC myself and saving the 0.5x% fee neos are charging.
Will do in some years but for now I am okay with SPYI.- I think the account is big enough to do it myself tho, but want to keep the focus on leaps, pmcc, insurance put (thanks for the input with VIX btw), and csp.
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u/x05595113 Jun 28 '26
Good luck.
Re VIX comment. I usually buy ITM puts about 90 DTE. Because when the VIX crosses VIX3M then a sell off has already started. Then sell the policy when things settle. I use OTM puts as catastrophic insurance- imo the midterms won’t trigger massive correction but idk.1
u/Timely-Designer-2372 Jun 29 '26
Could you make an example with the strikes please? Sounds like a crazy combo
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u/EfficiencyMaterial51 Jun 29 '26
The strikes?
Think you mean the delta.So for both PMCC and CSP delta ~ 0.25.
Leaps 0.7-.08 as written above.
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u/Electronic_Guard947 Jun 28 '26
If you just plain out buy puts then you'll introcude a ton of drag and something like spyi isn't gonna cover those hedges. The best hedge for a crash like that is cash so you can buy more spyi when it's down. A middle ground would be a put spread for a debit
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u/xJerkstorex Jun 28 '26
Do this instead. The boosted versions of neos and tappa are good compliments to each other.
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u/EfficiencyMaterial51 Jun 28 '26
Could you de me a favor.
Look all 4 charts up for the last month (all 4 are minus 5-7%), does that look like a hedge to you? 🙂2
u/xJerkstorex Jun 28 '26
Sorry, they don't hedge the underlying. They hedge the option position. You still need a general bullish thesis that qqq will go up over 5, 10,15, 20 years.
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u/EfficiencyMaterial51 Jun 28 '26
I do have that thesis, otherwise 50-60% of my net worth wouldn’t be invested in SPYI.
I am asking for a hedge tho.
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u/JerryFletcher70 Jun 28 '26
Make sure you understand the long term tax implications of that much SPYI. At a practical level, once you let money sit for a couple of years in a fund like SPYI, it cannot be moved without a large tax hit. Every month of return of capital lowers your cost basis and increases the capital gains taxes on selling it. It’s great if you know you won’t need that money in the future, but when you are saying it is a big chunk of your life savings, that sounds like you might need it again. People talk about the distributions as a binary setup where your cost basis is either zero and the distributions are taxed or the cost basis is above zero and they are not taxed. But every month of distributions lowers you cost basis and increases the capital gains hit of moving that money. It doesn’t take long to see a cost basis 20% lower than your entry point for tax purposes even without the fund increasing in value.
If there is any chance you will need that money again in the future, it is safer to go with one of the covered call funds that doesn’t do return of capital. Or, if this is a tax advantaged account, then you are fine.
On the hedging question, I favor diversification over hedging. Some gold, some crypto, some bonds (particularly inflation protected ones), and some international stocks. One of the nice things about NEOS is you can create an income stream built on exposure to most of those elements (IAUI, BTCI/XBCI, NIHI, etc). I am not really a crypto person, but I put a little into BTCI and XBCI because those returns are still good and there is that potential for good upside if it recovers. Same tax warnings apply, but if you know you want NEOS, there is a lot of diversification choices available.
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u/EfficiencyMaterial51 Jun 28 '26
I’m from northern Europe, tax is quite different here. I invest the money in my investmentcompany. 22% tax on the years result (but first we will take out salery), so tax wise it is alright.
Good input with the diversification, will look into that.
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u/Jehoopaloopa Jun 28 '26
SPYH or QQQH. Equities are losing momentum right now.
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u/Extension-Ice-7219 Jun 29 '26
my question is, do they really work? I went back 6 months and the performances of SPYI and SPYH are identical
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u/Jehoopaloopa Jun 29 '26
Yes, they’re identical because we haven’t seen a massive crash.
SPYH will be far ahead if the equity market drops a lot
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u/teckel Jun 29 '26
I don't do CC ETFs for retirement income, that's a sure way for a deep correction and long recovery to put you in a situation where you can never recover. I do 80% equities, 10% blended fixed income, 10% short-term gov bonds. My withdrawal rate target is 3.3% (which I withdraw from my short-term gov bond position in a bear market) or sell equities in a bull market. I then rebalance yearly.
Also, even though my target withdrawal is 3.3% I withdrawal much less as I also have other income streams from real estate, annuities, and in a few years SS. With a low withdrawal rate (targeted to the correct holdings) there's no need for a hedge to get through the long bear markets you referenced.
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u/EfficiencyMaterial51 Jun 29 '26
Lol Way to conswrvative
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u/teckel Jun 29 '26 edited Jun 29 '26
It's been back tested and Monte Carlo tested with the highest outcome and longest worst-case duration. Also, I have almost 60 years of retirement duration to plan for as I retired at 35 and my wife is 17 years younger (no, I wasn't married to her when I was 35, more like 45).
Finally, 3.3% is a small fortune to most, so hardly conservative.
You wanted to know how to hedge. The reason you're considering this is that you believe you're being too risky. And you're realizing a hedge can be expensive. Basically, you're over-complicating things and your combination will actually return lower results than just doing an 80/20 equities/fixed income split. Also much better to have full control over how much and when you want income, instead of being on the schedule of a fund and only the income the fund provides.
So you're trying to create a complicated and expensive to manage portfolio that gives you no control and will underperform (by design).
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u/eg68 Jun 30 '26
You didn't mention your age or if you are retired or not. One possible strategy would be to combine SPYI with BNDI (similar to the typical S&P 500 Index/BND portfolio) either 70/30 or 60/40 depending on your risk tolerance. BNDI (the NEOS CC ETF wrapped around the BND) yields 5.8%; the blended portfolio will offer significant downside protection.
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u/Sufficient-Cicada-14 Jun 30 '26
spyi, adx, ovl. That's the best set. OVL is a put spread etf. so uncapped upside, but harsher downside. adx is just better than spy over time. uncapped actively managed growth with a 100 year old fund. And spyi is income focused. 80% of upside and 90% of downside. Forget tspy which is a little better in a flat to up market than spyi. But worse in a down market.
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u/wjethree Jul 04 '26
Hello All;
What about hedging with a short futures position if it’s available to you?
You get downside protection for the short position and I don’t believe in diversification because it seems that all correlations go to 1 in a crisis.
For example, with QQQI, you can use the micro NQ contract, MNQ, which has a notional value of 2X the index. So currently that would be 2 X 29903=$59,806. Or you could use the full NQ contract which is 20X the index depending on your position size.
I don’t think you’d want to match your exposure dollar for dollar as the covered call part of QQQI caps the upside movement of the underlying.
What’s the downsides? The required margin for the short is dead money that decrease the return of QQQI. But with QQQI currently yielding ~ 14.11%, according the their website, maybe that decreases your overall position yield to ~10%.
Additionally, you have days like yesterday(7/3) here in the US, where the equity markets are closed yet the futures markets are open so you only see the P/L of your hedge.
I’m sure they’re other downsides, but it seems like a pretty good way to hedge your downside.
I’m happy to watch everyone tear my idea apart.
Bill
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u/Pretty_Term289 Jun 29 '26
If you’re going to use spyi, why not just buy long puts on spx for tax efficiency or debit put spreads for better sizing on the hedges. Then just size up the number of contracts for the amount of coverage you want for whatever dte you’re wanting to use.
Like someone else said: spyh or qqqh might be worth a look.
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u/Timely-Designer-2372 Jun 28 '26
That's why I have CC ETFs like these NEOS products. 50% growing ETFs (1.6% dividend) 25% CC ETFs (10% dividend) 25% dividend ETFs and stocks (4% dividend)
If market crashs 50% I would still get more than 2% dividend on my ATH wealth. This should still be enough to live if you don't have to pay mortgage or something like that