A high-yield covered call portfolio with concentrated exposure to North American stocks

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Balanced Investors

This portfolio suits an investor seeking high income and moderate growth with a balanced risk tolerance. The covered call strategy aims to generate significant income, making it ideal for those looking to supplement their cash flow. However, the concentrated exposure to North American equities and limited diversification suggest a preference for those comfortable with regional and sector-specific risks. A medium-term investment horizon would be appropriate, allowing time to weather market fluctuations and capitalize on income generation.

Positions

  • Roundhill ETF Trust - Roundhill S&P 500 0DTE Covered Call Strategy ETF
    XDTE
    60.00%
  • Roundhill ETF Trust - Roundhill NDX 0DTE Covered Call Strategy ETF
    QDTE
    40.00%

The portfolio is composed of two ETFs, with a 60% allocation to the Roundhill S&P 500 0DTE Covered Call Strategy ETF and a 40% allocation to the Roundhill NDX 0DTE Covered Call Strategy ETF. This composition reflects a focus on covered call strategies, which are designed to generate income through option premiums. The portfolio's low diversification score indicates a concentrated approach, primarily focused on North American equities. While this structure can enhance income potential, it may limit exposure to other asset classes that could provide additional diversification benefits.

Warning The historical data covers less than 2 years, which reduces the confidence in the calculated values.

Growth Info

Historically, the portfolio has delivered a robust Compound Annual Growth Rate (CAGR) of 19.73%, with a maximum drawdown of -8.10%. This performance suggests strong returns with moderate risk, as indicated by the drawdown figure. The portfolio's days that make up 90% of returns being only nine highlight its reliance on a few key trading days, which can be a risk if those days do not perform as expected. It's essential to remember that past performance does not guarantee future results, and the portfolio's performance should be monitored regularly.

Warning Due to limited historical data, this may show extreme values that are not realistic.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, show promising potential for this portfolio. With 1,000 simulations, the portfolio's 50th percentile end value is projected at 1,363.4%, and all simulations show positive returns. The annualized return of 21.66% suggests strong growth potential, but it's important to note that these projections are based on historical data and assumptions that may not hold in the future. Investors should remain cautious and consider potential market changes that could impact these projections.

Asset classes Info

  • Stocks
    175%

The portfolio's asset class allocation is heavily weighted towards stocks, with a total exposure of 175%. This concentration in equities highlights a focus on growth and income through covered call strategies. While stocks can offer high returns, they also come with increased volatility. The lack of allocation to other asset classes like bonds or commodities may limit the portfolio's ability to mitigate risk during market downturns. Diversifying into additional asset classes could provide more stability and reduce overall portfolio risk.

Sectors Info

  • Technology
    19%
  • Financials
    8%
  • Consumer Discretionary
    7%
  • Health Care
    6%
  • Telecommunications
    6%
  • Industrials
    4%
  • Consumer Staples
    3%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    1%
  • Basic Materials
    1%

The sector allocation shows a significant concentration in technology (19%), followed by financial services (8%) and consumer cyclicals (7%). This sectoral concentration can lead to higher volatility, especially if these sectors experience downturns. The portfolio's exposure to technology aligns with current market trends but may be sensitive to interest rate changes. A more balanced sector allocation could help reduce risk and provide a more stable return profile. Investors should consider the potential impact of sector-specific risks on their portfolio.

Regions Info

  • North America
    60%
  • Europe Developed
    0%
  • Asia Developed
    0%

Geographically, the portfolio is heavily concentrated in North America, with no exposure to Europe or Asia. This lack of geographic diversification may increase vulnerability to regional economic downturns or policy changes. While the North American market has been strong, adding exposure to other regions could enhance diversification and reduce risk. Global diversification can help capture growth opportunities in emerging markets and mitigate risks associated with regional market fluctuations.

Market capitalization Info

  • Mega-cap
    50%
  • Large-cap
    37%
  • Mid-cap
    19%
  • Small-cap
    1%

The portfolio's market capitalization exposure is primarily in mega-cap stocks (50%), followed by big-cap (37%) and medium-cap (19%) stocks. This focus on larger companies can provide stability and reduce volatility, as these companies often have more established revenue streams and market presence. However, the limited exposure to small-cap stocks (1%) may restrict the portfolio's potential for higher growth. Balancing market capitalization exposure could enhance diversification and capture growth opportunities across different company sizes.

Dividends Info

  • Roundhill ETF Trust - Roundhill NDX 0DTE Covered Call Strategy ETF 36.90%
  • Roundhill ETF Trust - Roundhill S&P 500 0DTE Covered Call Strategy ETF 24.30%
  • Weighted yield (per year) 29.34%

The portfolio boasts a high total dividend yield of 29.34%, driven by the covered call strategies employed by the ETFs. This high yield can provide substantial income, making it attractive for income-focused investors. However, it's important to understand that high yields often come with increased risk, and the sustainability of these yields should be monitored. Investors should assess whether the income aligns with their goals and consider the potential impact of changes in market conditions on dividend payments.

Ongoing product costs Info

  • Roundhill ETF Trust - Roundhill NDX 0DTE Covered Call Strategy ETF 0.95%
  • Roundhill ETF Trust - Roundhill S&P 500 0DTE Covered Call Strategy ETF 0.95%
  • Weighted costs total (per year) 0.95%

The portfolio's total expense ratio (TER) stands at 0.95%, which is relatively high compared to passive index funds. While the costs are justified by the covered call strategies that the ETFs employ, reducing expenses can improve long-term returns. Investors should consider whether the potential benefits of these strategies outweigh the costs and explore lower-cost alternatives if necessary. Keeping costs in check is essential for maximizing portfolio performance over time.

Risk vs. return

This chart shows the Efficient Frontier, calculated using your current assets with different allocation combinations. It highlights the best balance between risk and return based on historical data. "Efficient" portfolios maximize returns for a given risk or minimize risk for a given return. Portfolios below the curve are less efficient. This is informational and not a recommendation to buy or sell any assets.

The portfolio's current allocation may not be optimized according to the Efficient Frontier, which represents the best possible risk-return ratio for a given set of assets. By adjusting the allocation between the current ETFs or introducing new assets, the portfolio could achieve a more efficient balance between risk and return. Investors should evaluate their risk tolerance and explore potential rebalancing opportunities to enhance portfolio efficiency and align with their investment goals.

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