QQQY: The New Zero (0) DTE ETF Everyone is Talking About
Sep 14, 2023
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.
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.
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
Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.