QQQY: The New Zero (0) DTE ETF Everyone is Talking About

By:Nick Battista

Should you be trading the new QQQY exchange-traded fund?

  • QQQY is a new ETF focused on generating monthly income via the combination of one DTE to up to one-week short put options and Treasuries
  • Option exposure in the fund will be limited to 20% of the net asset value with 80% allocated to cash and Treasuries
  • The fund will have capped upside potential like a covered call

Defiance ETFs launched a new “0 DTE” focused ETF, the Nasdaq 100 Enhanced Options Income ETF (QQQY). The fund is an actively managed ETF that seeks to provide monthly income with exposure to zero-day options on the Nasdaq, as well as fixed income from 6month to two-year Treasures.

How does QQQY Work?

The fund seeks to generate income via the selling of at-the-money (ATM) and/or in the money (ITM) short-put options in the Nasdaq index with a daily benchmark of 0.25% return. The options sold can be variable, from ATM options up to 5% ITM. The fund will typically use one-DTE options but can extend up to one week out in time based on the day of the sale.

Trading ATM, and slightly ITM options provides the potential to capture both intrinsic value gains from the increase in the index price, as well as extrinsic value in the form of the premium sold via the options. It’s important to note that intrinsic gains will be capped via the options, much like a covered call, so the potential upside tail exposure is limited.

The fund will also keep a sizable portion of the funds in short-term Treasures, ranging in 6-month to two-year maturities. Up to 80% of the fund will be allocated to cash or Treasures as fixed income and usually will be held until maturity.

QQQY will distribute the income generated from the fund monthly.

Why is QQQY Important and who will trade it?

QQQY is an interesting new investment opportunity for those looking to get exposure to short term option trades via a cheap underlying ETF. This product can be used in smaller sized accounts or IRA accounts looking for potential passive income. This of course, isn’t a paycheck trade—the ETF will still have exposure to adverse markets, changes in interest rates, and has a sizable 0.99% management fee.

Given that most of the fund is allocated to Treasuries, the fund has the potential to underperform when the Nasdaq goes up significantly – but potentially outperform the market if it were to go down relative to the index itself.

The fund will be most profitable with a sideways up move in the market daily depending on which options are sold for that expiration. Because of the limited option exposure, the fund will likely underperform the comparable option position from a notional value perspective – as the Treasure yield on a daily basis is likely to be far less than the potential extrinsic value of both ATM options as well as the potentially 5% ITM option, and the drag of the 0.99% management fees.

You can read the summary prospectus HERE.

What do you think about this new ETF? Hit me up on twitter! (or X?)

Nick Battista, tastylive director of market intelligence, has a decade of trading experience. He appears Monday-Friday on Options Trading Concepts Live. On Wednesdays, he co-hosts Johnny Trades. @tradernickybat

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

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