IF the price of SVOL grows 0% in 1 year or 2 or 3, is it not still returning 16%? Is the total return, with these 0 price changes, 16%?

Thanks for those very kind words. So far, nobody has dodged a question so I keep asking. A couple of fund managers have declined to be interviewed but I'll keep trying. I have more interviews in the works :)

Thanks for your perspective. I know you spend a lot of time studying ETFs!

I have had svol for a while now it is 25% of one of my portfolios. This video gave me confidence to keep it in this range while i disversify but also buy significantly more. Great interview again!

Tax is like 56%

What are the taxes like? Do you pay regular income taxes, short term or long-term capital gains? Thank you.

Most of the distributions are return of capital. On those you pay no income tax but it lowers your cost basis and then you pay capital gains tax upon sale. The rest (a small portion) is ordinary income.

@@armchairincomechannel thank you

I appreciate that! Thanks for the feedback.

I appreciate your feedback, thank you :) I'm working on more interviews for the coming weeks and months!

Thanks for your feedback. I don’t like hype either 😀

Thanks! I don't like small talk either. Too busy for that :) I've tried investing in Singapore, Australia, and Canada and been burned by exchange rates and the lack of information that's available for the US market. Therefore I've chosen to focus exclusively on the US market. Investing in the US as a foreigner has some tax advantages too.

@@armchairincomechannel Makes sense. Where are you based out of it? I figured the US for tax purposes.

Was in the US, now in Asia. Planning to go back to Vietnam next month...it's the best value location at the moment.

Thanks COTY. Larry was happy to answer anything I asked him so he made it easy. I want to know where my investment dollars are going and what they're doing :)

Using SVOL instead of money market…does this make financial sense? Idon’t care about risk. THANKS.

You're right. I wouldn't put too many eggs into 1 basket for that reason. It works well under most market conditions but not all!

Thanks for your continued analysis on SVOL. It's one of my top performers.

Thanks for the detailed info. So in what conditions do you see Svol struggling? And whats the probability of that happening since I appreciate your knowledge on the topic - even an approx probability or guess would be helpful

This is a complex topic and I have some SVOL videos that explain it. In short, SVOL would suffer if there's a massive spike in the VIX. It has call options to address this outcome. Also, it suffers when the VIX is rising in value as it did in 2022. The shape of the VIX futures curve also affects the ability of SVOL to generate income. I can't estimate a probability of the VIX rising or spiking because it's random...can be caused by war, pandemic, economic crisis, etc.

@@armchairincomechannel Fair enough but your response helps in general. I guess due to the randomness I'll keep it to under 10% of the portfolio. I would love to add more but would first like to see how the strategy actually reacts to a rising vix (when that happens). Thanks again and great content and comments as always!

​@MStar10 SVOL would suffer losses if VIX futures stayed in Backwardation for months and VIX stayed below 50. In this scenario, the long VIX 50 calls would not get monetized and every month during Backwardation, there would be a loss of around 1.5% assuming 30% short VIX allocation with a 5% month to month VIX differential. This happens very rarely, probably less than 5% of the time.

Thanks for that international list, I'll take a look. I'm not familiar with any of them but am always interested in diversification.

You’re most welcome. Thanks for letting me know.

Glad it was helpful!

That’s great to hear! My hope is that you learn something new from each video. I learn a lot from doing the research :)

Hi, and thanks for your feedback. That's an important question and the answer requires a separate video because it's complicated. Basically it's a matter of reviewing a backtesting model and the assumptions of that model. Simplify's position is that the protective VIX calls would minimize or eliminate the loss but I've requested more specific details.

Glad you enjoyed it!

I’m already at my full allocation. But am happy to hold.

@@armchairincomechannel 5%?

For me, a full allocation is 5%. I diversify more than most people. I don't want any one stock to have the potential to cause me pain if something goes wrong. I'm not looking for the perfect investment (it doesn't exist). I'm looking for many good investments.

Thanks for that simple explanation of the call hedge. Much appreciated!

Thanks for advising about this. I haven't received anything to this effect from the 3 brokerages I use to hold SVOL (including Schwab), but I will keep an eye out for it. Therefore not sure if its an SVOL thing or a Robinhood thing (I haven't used them).

​​@@armchairincomechannel Not sure either on my end but am curious as I'm now unsure if this should be held long term or if their dividends are affected. Appreciate your interviews and vlogs. Hope you can look into this and get SVOL back on.

Glad you think so! Thanks for taking the time to let me know :)

@@armchairincomechannel one additional question that I have as far as asset allocation, do you put any of your high yielding funds in a Roth type product or is the risk not worth a reward in your opinion not advice thank you

As always......Great content

Thanks for watching.

Glad it was helpful :)

Glad you enjoyed it!

Thanks. These topics can be quite confusing so its easy to jump to conclusions. I've been guilty of it in the past.

Much appreciated!

It's a good point. That topic is both complicated and fluid (the assets keep changing). I'm still working on getting my hands around it but it will require a dedicated video.

Glad you enjoyed it!

Glad you enjoyed it!

Thanks for your feedback. I don't understand your questions but I'll try my best to respond...1/ There's no "snowball", perhaps you're confusing that word with the fund manager, "Simplify". 2/ The "Return of Capital" is a tax treatment, not a return of investor principal. 3/ SVOL retains some of its investment income to pay out in months when income is lower...this is simply to provide more consistent distributions. 4/ Simplify estimates the amount of ROC on its website but the actual number won't be accurate until the end of year financial statements are released. 5/ I don't know what you mean by an "institution", these funds are regulated by the SEC. 6/ I wouldn't use the word "secure" for any investment. You're being rewarded for taking risk. Overall, my only suggestion is to limit investments to stocks and funds that you fully understand and are completely comfortable with.

@@armchairincomechannel Thank you for taking the time to give detailed feedback! I came across this site because another forum advised against SVOL, "because the investors' capital is paid out as dividends" (that would be a classic pyramid scheme). But thanks to your explanations, everything is now clear to me (I misunderstood that in the video) 🙂 I will now buy SVOL in the near future.

Thanks for the analysis as always!

You're welcome :)

Appreciate it! Thanks for watching, as always :)

Thanks Norman :)

@armchairincomechannel How goes the work on the new studio ?

Thanks for your feedback. Impossible to know when the next correction will come!

Yes until you want to sell. Return of capital will lower your cost basis so when you finally sell you will pay more capital gains tax.

That's true, it not zero tax. If your capital gains tax rate is lower than your ordinary income tax rate then its a preferable tax treatment. It also gives you flexibility on the timing of the taxable event.

@@armchairincomechannel since I'm in the 12% US federal tax bracket my qualified dividends are taxed at zero. If I make more money in the future and being a higher tax bracket. If I do eventually sell Investments that had a return of capital I would pay higher tax in the future.

Glad you enjoyed it!

The brokerage statement groups the tax categories so that the account doesn't have to do it line by line.

Thanks, you are one of the best I found on KZfaq so far for high yield content!

It survived the worst possible scenario (huge VIX spike) and its competitors didn't. I'll make a video about it. I still like it.

Good question. In preliminary discussions they said that it was to deliver a more sustainable yield than short term treasuries (which are good for now but will shrink). Assets like AGGH are complicated and the mix if assets keeps changing. It's a topic I continue to research.

Thanks for your perspective.

Yes, I've exchanged some emails on this subject too. He said that 2024 will be more accurate. I would like to see more accuracy and transparency on this.

The fund buys VIX calls but those puts would add an extra layer of protection. 👌🏼

You're right...it's a whacky accounting requirement that show the cost of the loan but not the revenue generated by it. It's so confusing they plan to ditch that form of borrowing to make things simpler.

Glad it was helpful!

I don’t know the degree to wash oh that was a factor back in 2022 but I follow your logic. I believe the holdings were more heavily weighted to short term treasuries back then which suffer limited downward pressure from higher rates (vs longer term treasuries). This year, AGGH has been a slight drag on performance but they lightened up on it recently. They’ve changed the holdings several times so it’s hard to track.

Your updates are appreciated 😀

I continue to hold SVOL. Thanks for your kind feedback :)

Glad you enjoyed it! Thanks for watching as always :)

That’s an important topic. The option hedge should save the day but I’d like to know more details.

Thanks for your feedback. A black swan event would disrupt income as you explained. The VIX calls they buy to hedge such an event would kick in and mitigate the loss. The exact level of protection those calls would deliver is up for debate, hence the risk of the fund. I don’t see the VIX futures curve going into backwardation for anything more than a brief period. U less it’s something dramatically worse than Covid but then we have bigger problems.

It's one of my smallest investments of the past 12 months and...the highest return.

You’re welcome 😀

That’s great! (As long as you are diversified of course)

Great question. The optimal time to buy SVOL would be when the VIX is unusually high and likely to head down (doesn't happen often). So you're right, now is not optimal. The timing is mostly about 2 factors, the outright level of the VIX (as you mentioned) and the shape of the VIX futures curve (a bit more complicated). SVOL can do well with a low VIX if the futures curve is favorable (ie in "Contango" or sloping up). It's explained in my previous SVOL update:kzfaq.info/get/bejne/r6dynchzx9uRhHk.html

SVOL is the only volatility fund I have so there are no other funds to compare it to directly. If you're asking about simple total return...JEPQ and MAXI have had a good trailing 12 months. MAXI review coming up later this month.

@@armchairincomechannel Many thanks for the reply! Yes, dividends and simple total return are the goal. It's been a few months since i have reviewed JEPQ and was turned off by the variation in dividend payment BUT was extremely impressed today with their 1 year return at 20%! MAXI is astounding this morning showing a 60% 1 year growth so will be adding that and looking forward to your video. Best regards, Steve.

MAXI numbers are crazy good but it will be a roller coaster so I wouldn't put too much into that one because I need to be able to sleep at night. Bitcoin can drop 50% in a month easily.

You're welcome!

He's been a very naughty boy ;) I promise to find a solution for that before the next interview!

I’m quite fond of it too. Thanks for watching.

It's a thing of beauty for sure!

Good guess! Yes, it's just half the overnight lending equation. The revenue part cancels it out. It's so confusing they're working on ditching it.

They buy protective calls to hedge that risk. At some point I'd like to dive into that subject in more depth but its quite technical. Shailesh says the calls would cover the risk but I'd like to see an independent study.

Glad to hear it! Thanks for letting me know.

I don't have a magic number but generally, the higher the return, the more I reinvest to cover potential hiccups. SVOL is above average for return and risk. At the moment my portfolio is yielding approx 11% so I'm reinvesting approx 3% and spending 8%.

Completely different strategy. Yieldmax writes covered calls on individual stocks. SVOL shorts the VIX.

Thanks for watching :)

Any tax considerations if held in an IRA? Thanks

Depends on your goals. I like all 3. I'm focused on income and SVOL does a nice job of that. For appreciation the other 2 have more upside.

Working on a MAXI video to be released later this month :)

Thanks for the SVOL analysis...as always :)

Thanks for the update!

Apple pie or cheesecake? They're both quite different. One sells covered calls on the S&P 500 and the other trades VIX futures. I can't compare them. I'd say SPYI comes with less risk because it's assets consist of the S&P 500.

Goog to know, thanks as always.

Thanks for watching and sharing your perspective :)

That's an encouraging sign, thanks for posting these updates :)

That's somewhat reassuring to hear, thanks for the update!

Technically that's a win!

If you’re asking about SPYI Return of Capital, I made a video about that too. Here it is: Return of Capital: Good or Bad? (SPYI ETF 12%) kzfaq.info/get/bejne/nap3aZSe2bDZlJ8.html

@@armchairincomechannel thank you

Management expense ratio is 0.50%. That's not "Huge". If you watch the video, at 10:40 Larry explains the interest expense that makes the fees look high.

Not really, at least not in the sense of "running out of money". SVOL trades futures and uses treasuries as collateral. The percentage of collateral required changes and if it increases significantly, they use Repurchase Agreements to augment their collateral. These are overnight loans for very short term liquidity. This is common for futures traders. The value of the futures contracts never exceeds the value of the fund's portfolio. It's a great question because futures are both complicated and confusing!

@@armchairincomechannel thanks for the explanation!

Thanks for reply ! clear and understanding !

Only if you fully understand the mechanics of it and the risk. The protective calls haven't been tested in the real world.