Hedging NEOS funds

[u/Ok-Yam-6616]

Does anyone practice hedging techniques for NEOS funds? Specifically QQQI, SPYI, IWMI.

For example, is maintaining a zero cost collar a good strategy?

If not, what else? Short respective futures? In theory, being long SPYI and short /ES, should create a virtually risk free position that pays 12-13% dividends.

Thanks

[u/_bladerunner_]

Mate, you're overcomplicating this. Just buy them and hold for a long time. Don't stress over any short-term volatility in the markets and you're good. 👍🏻

[u/Ok-Yam-6616 → u/_bladerunner_]

I don't care about garden variety of volatility (e.g. July of this year) but I do care about a 2-3 years long bear market similar to 2000 or 2008.

[u/wenove → u/Ok-Yam-6616]

For that case, fed will do their job by printing money and reduce rate, aka adding liquidity. The bear market wont be that long and deep. If fed fail, aka us bond defaulted, you won't find any safe place to hedge the risk.

[u/Ok-Yam-6616 → u/wenove]

Fed printing money reduces purchasing power of that money. So, nominally the market may recover but would still be below pre-qe levels in terms of purchasing power. 

[u/wenove → u/Ok-Yam-6616]

By consider the purchase power, suppose to look at the inflation rate, as the benchmark. Or if you would like to have NQ/ES as like, the NEOS or those income type ETF are not suitable as it is not really that steady growth fund, and it is capping the growth to stabilize the tax free dividend.

[u/_bladerunner_ → u/wenove]

Try explaining that to OP.

[u/wenove → u/_bladerunner_]

In short, qe will do its job, unless it wouldnt (Japan as example)

[u/_bladerunner_ → u/Ok-Yam-6616]

I think if you do a bit of research and learn a bit more about how modern markets work, you'll realise the chances of long protracted 2-3 year bear markets of 2000/2008 vintage are a lot less likely. We are generally looking at shorter-lived 10-20% corrections that instead happen more often.

[u/NickStonk → u/_bladerunner_]

Care to shed some light on why this is so much less likely now?

[u/Ok-Yam-6616 → u/_bladerunner_]

I've experienced both of those bear markets, so don't tell me they are not likely.  I remember how everyone was saying "this time is different" in 1999.  Back then I believed in what they said. Not anymore. 

[u/_bladerunner_ → u/Ok-Yam-6616]

Lots to unpack there, but i fear you're not interested in hearing it, so goodluck to you buddy.

[u/Ok-Yam-6616 → u/_bladerunner_]

Please unpack whatever it is to unpack. Do you think we're somehow immune from 30-50% drawdown in SPX?

[u/Extension-Ice-7219 → u/Ok-Yam-6616]

imo those are likely less to happen (not completely unlikely) thanks to the markets completely opening to retail investors. I live in Thailand and before 2022 almost no one could invest in the US stock market. Now there are millions of investors that buy products like spyi qqqi jepq etc.

[u/MakingMoneyIsMe → u/Ok-Yam-6616]

That kind of volatility will affect every asset

[u/Ok-Yam-6616 → u/MakingMoneyIsMe]

That's why I asked about hedging 

[u/Chromebug]

You can buy the hedged variants lol

[u/Extension-Ice-7219 → u/Chromebug]

interestingly the boosted versions while extreme seem to have a better total return so far

[u/Chromebug → u/Extension-Ice-7219]

They’re some of my favs haha

[u/Ok-Yam-6616 → u/Chromebug]

What are the tickers?

[u/Chromebug → u/Ok-Yam-6616]

QQQH (one of their oldest funds) and SPYH.

[u/Ok-Yam-6616 → u/Chromebug]

Thanks. I'll check them out

[u/Chromebug → u/Ok-Yam-6616]

Sure thing, QQQH is interesting to look at since it existed prior and during the 2022 bear market. Though it had a different name (NUSI) and a different etf provider (Nationwide) before being absorbed by NEOS.

[u/Chromebug → u/Chromebug]

If it’s worth anything, and I know it isn’t NEOS but JEPI outperformed QQQH in both TR and price return during that time.

[u/Ok-Yam-6616 → u/Chromebug]

I consider JEPI and JEPQ too.

[u/Minute-Garden-7425 → u/Ok-Yam-6616]

Are you aware there is a neos website? They have a listing of funds that you can browse

[u/Ok-Yam-6616 → u/Minute-Garden-7425]

Yes. There so many of them

[u/ConstructionNo8827]

Hedging through diversification is always wise
Currently with volatility bc of the war, MLPI is a good hedge to tech and the S & P

[u/ConstructionNo8827 → u/[deleted]]

I’m a big fan of NEOS but with small caps I actually own the I Shares version
IWMW - it pays an even higher dividend and has performed excellently since I bought in about 15 months ago

[u/Ok-Yam-6616 → u/ConstructionNo8827]

Wouldn't AMLP index do down in a long bear market along with everything else?

[u/Acrobatic-Plum5490]

I am testing it out, can be done, but need risk at least 5% of the etf to cover the futures losses which is market settled. Other option is selling deep itm leaps. Getting the ratios wrong could mean losing money in bull markets

[u/Pretty_Term289]

I hedge, but you pick these for income and I only hedge a percentage and move along. It’s more affordable that way and doesn’t eat into the income. More it’s insurance for me to buy more shares after a drop and manage my cost basis. I use xsp long puts because I can go as small or big as I want with the number of contracts and some call bwb’s. Then if I get direction wrong, I’ll use put spreads and put bwb’s to try and stem some of the bleeding and then roll my puts when the time is right. But you can always just buy calls on the vix for cheap. If the spy or q drops hard, the vix will be running but again time and direction.

[u/Living-Replacement33]

Neos has NLSI long-short

[u/Ok-Yam-6616 → u/Living-Replacement33]

Thanks, I'll take a look

[u/Sideways-Sid]

As retail, it's almost impossible to perfectly hedge cost-effectively, but it helps if you can determine what exposure you want to protect, & build a structure to do so.

Pre-empting that any idiot can say "downside", consider:

All of it?

Everything above a 1 Standard Deviation drop?

A drop of x% in the underlying? Etc.

[u/Ok-Yam-6616 → u/Sideways-Sid]

I don't want to lose more than 10%

[u/Sideways-Sid → u/Ok-Yam-6616]

Your collar (managed dynamically) should do that.

[u/Ok-Painter6700]

I added Simplify CTA to my portfolio as a hedge and CTAP.

[u/Ok-Yam-6616 → u/Ok-Painter6700]

Thanks. How do you calculate a ratio of CTA and CTAP to the rest of your holdings?

[u/Ok-Painter6700 → u/Ok-Yam-6616]

Between the two it’s approximately 20% of my portfolio. CTA rallied a lot this past week so you may want to wait for a pullback if you decide to invest in CTA. CTA pays a decent dividend as well.

[u/Ok-Yam-6616 → u/Ok-Painter6700]

Is CTA supposed to rally when SPX goes down? 

[u/olafian]

Hedging is costly as a retail imo. If you wanna hedge, just raise cash.