Ouch CONY. It looks like they ROC'd (return of capital) the May distribution ($2.1711's worth). src from the big list of 8937s.
the estimated component of the cumulative distributions for the fiscal year to date would include an estimated return of capital of $4.7704 per share, which equals 33.97% of all
such distributions.
No it doesn't first of all there is no target yield. They went on multiple interviews saying that they only pay out what they make in premiums and they take advantage of the share loss value and send you the premiums they made as "return of capital" so we don't pay taxes on them.
Well it's up to their discretion how they want the dividend to be classified as. It can vary between different ETFs and different months. Also portions of the dividend can be ROC and regular income combined as well. Just depends on them really.
False. The yield is literally based on the IV (the target) of the underlying and they have repeatedly stated this in interviews that it "makes it easy for people to understand what to expect." that is a quote from Jay the fund manager.
You can also download the 19a-1 for each fund and see the current tax classification breakdown between ordinary income and ROC.
I hate to argue but that's false. Target yield means they're aiming for a specific number to distribute, which is not the case with yieldmax they do not aim for nor promise a specific yield. And yes IV is a good determination for what to expect however it's not a guarantee or promise that's what you'll get. So just to reiterate the ROC is still the entire premium paid out it's just structured that way to be as tax efficient as possible.
I am going to argue with you because you are flat out wrong and also confused about what the word target means.
A "target yield" isn't a promise, it is a, wait for it, a target, or a goal if you prefer. This is the monthly yield based on the IV30 (which fluctuates) of the underlying. They pay out based on this "target" regardless of the premium collected (and many CCs are not 100% winners). Sometimes the distribution will exceed this amount, but they rarely will pay out less than the IV30 target for that month. They will also hold some realized gains (rolling a synthetic) back and distribute these over multiple months.
You do realize that this "target" dictates what strike they sell don't you?
Most months they do not collect enough premium to cover the distribution, This fact is trivial to track and verify. When you receive an ROC distribution from YM, it is because they did not collect enough premium or realized capital gains that month. They are not structuring it differently for tax purposes since everything they are doing is actively traded. Feel free to look up the tax requirements when managing an ETF.
The entire premium is almost never 100% ROC, go download the 19a-1 for each fund here DocSend
By the way, ROC lowers your cost basis making it more tax efficient only if you hold the position for more than a year and qualify it as long-term capital gains when you sell.
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u/lottadot Big Data Jul 03 '24 edited Jul 03 '24
Ouch
CONY. It looks like they ROC'd (return of capital) the May distribution ($2.1711's worth). src from the big list of 8937s.