Is QYLD the ultimate strategy for generating monthly dividends?

Dividends are an excellent way to generate passive income. Companies make a payment to their shareholders in the form of cash which is referred to as "dividends". This payment is typically made on a regular basis, such as quarterly or annually, and is a way for companies to distribute some of their profits to the people who own a portion of the business.

Many retail investors have built a "dividend investment strategy" around generating living expenses from their investments. For such investors, generating monthly dividend distribution is of utmost importance along with dividend yield. One of the most popular tools to achieve this goal is the "QYLD - Global X Nasdaq 100 Covered Call ETF".

What is QYLD:

QYLD is an acronym for the Global X NASDAQ 100 Covered Call ETF. The "covered call" strategy referred to in the ETF's name involves selling call options on the underlying stocks in the NASDAQ 100 Index in order to generate additional income. The goal of this strategy is to generate higher returns than would be possible through a passive investment in the NASDAQ 100 Index alone.

The focus areas are - High Income Potential, Monthly Distribution and Efficient Options Execution. This ETF was launched on 12/11/2013 and has a long history of distribution with high dividend yield.

QYLD Top Holdings

At the time of publication (Feb 12, 2023), QYLD has 102 holdings and below is the list of Top 10 Holdings -

For the full list of holdings, check out their website -

My experience with QYLD

In my goal to generate passive income, I came across this ETF in May 2022 and after weeks of research, I decided to take a position in June 2022. I always look to maximize the yield in all my trades and decided to use the "Wheel Strategy" (more on this topic in the future newsletter).

This video will help you to get a good idea about this ETF and my specific strategy -

Planned Trade

My initial goal was to start with 100 shares (1 contract) of QYLD and test out the "Wheel Strategy" while generating monthly dividends and premiums on both Cash Secured Put and Covered Call for 6 months.

Here's a snapshot of what I had planned -

Actual Trade

Just like life, trades also do not always go according to the plan and it's important as an investor or trader to track and learn from each mistake.

Though I did not achieve the desired ROI as planned, QYLD still generated a decent amount in 2022 when the broader market was in decline.

Here's the snapshot of how the trade went:

In this video I go over the trade in detail.

Conclusion:

Contrary to popular opinion, no stock or ETF will always be the answer to all your investment problems. I have read and heard from many retail investors where they consider QYLD or similar ETFs to be the best way to generate passive income. As you saw from my results, the macro environment played a big role in the stock price and that will dictate the dividend yield for QYLD. When the markets are ripping higher, Covered Calls will generate higher premiums vs when the broader market is in decline. You saw how the monthly distributions declined due to those factors ultimately leading to lower ROI on my trade.

I will continue to run Covered Calls on my existing shares and use the dividends and premiums to fund the purchase of other dividend stocks. My next update will be posted in June 2023; subscribe to the channel so you don't miss out.

Public Portfolio 📈

Buys (at the time of publication):

• No buys

Sell (at the time of publication):

• No sell

Dividends (at the time of publication):

• $0

Public Portfolio Spreadsheet can be found here

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