iShares Investment Grade Corporate Bond BuyWrite Strategy ETF

LQDW

Market cap $289M

iShares Investment Grade Corporate Bond Buywrite Strategy ETF offers exposure to investment-grade bonds with an options overlay for extra income. LQDW combines a long position in LQD and monthly call option sales, providing premium income but capping upside during strong rallies. Current credit spreads for LQDW's main holdings (A and BBB) are stable, but high-yield spread widening could signal future risk.

Imagine stocks and funds paying you dividends monthly! Your angst awaiting dividend payout is reduced 300%, or more, compared to quarterly, semi-annual, or (ugh) annual doles! September U.S. exchange-traded-monthly-paid (MoPay) dividends, upsides, and net-gains include: 1. Stocks-by-yield (77); 2. Stocks-by price-upside (30); 3. Closed-End-Investments, Exchange-Traded-Funds & Notes (CEICs/ETFs/ETNs) by-yield >10% (80); 4. ‘Safer' Ideal-Dividend-Equities by Cash Flow Margins (31). Items: 1. Top MoPay stock gains; 2. Overall best MoPay gainers; 3. Funds vs. Equities; 4. Fund risks/rewards. 5. Safer Equity Rankings All per prices as of 8/29/25.

LQDW offers a 17% yield via a covered call strategy on an investment-grade bond ETF. LQDW has underperformed its benchmark LQD and some peers, with a 35.9% capital erosion in less than three years. I expect LQDW to provide ongoing sub-par total returns and capital losses and announce a reverse split within a few years.

Buy-write ETFs like LQDW and HYGW historically underperformed their underlying ETFs due to mechanical monthly covered Call strategies. LQDW and HYGW's make sense in very few scenarios, in most scenarios they either under-perform their underlying or incur losses. Investors should consider direct investments in LQD or HYG if they expect appreciation, or explore other high-income stocks and ETFs for better returns.

Investors may be overexposed to cash, with money market assets totaling $6.1 trillion, highlighting the need for diversified income sources. Moving money to bonds can outperform cash, especially in the months after the first rate cut. But bond ETFs offers lower yields with certain volatility. LQDW deploys covered call strategies on the Investment Grade Corporate Bond ETF (LQD) to get high yield (16%) with historical volatility at low single digit.

iShares Investment Grade Corporate Bond Buywrite Strategy ETF has significantly underperformed its underlying asset, LQD, due to its covered call strategy. LQDW's unsustainable options strategy causes significant NAV erosion, making it a poor choice for long-term investors. NAV drops that are larger than the underlying asset show that LQDW's trades are frequently unprofitable. The fund barely holds its value, even with all distributions reinvested.

iShares Investment Grade Corporate Bond Buywrite Strategy ETF pays a 2-digit yield thanks to a covered call strategy based on a bond ETF. Such a fund is likely to attract income-oriented investors. However, historical data point to a heavy loss in capital and a shrinking average distribution in just 2 years of existence.

LQDW is a covered call strategy based on writing calls on the LQD while also going long. It's not too bad if you expect downside in the LQD, though it still faces downside risk. It's not great if you expect a decent amount of upside or more in the LQD.

The iShares Investment Grade Corporate Bond Buywrite Strategy ETF has lost money since its launch in August 2022 due to rising yields and extreme volatility. The ETF should perform better in 2024 as high Treasury yields and implied volatility rates result in strong income, while the scope for large moved in yields has diminished. A renewed rise in inflation poses the main risk to the LQDW as it would put upside pressure on yields as well as potentially triggering a rise in volatility.

Imagine stocks or funds that pay-out their dividends once-a-month! Unlike waiting for quarterly, semi-annual or (ugh) annual payouts, your angst awaiting money is reduced by 300%, or more!. These January U.S. exchange-traded monthly-paid (MoPay) dividends, upsides, and net-gains include: 1. Stocks by-yield (83); 2. Stocks by price-upside (30); 3. Closed-End-Investments, Exchange-Traded-Funds & Notes (CEICs/ETFs/ETNs) by-yield >10.4% (80). Items: 1. Top MoPay stock gains; 2. Overall best MoPay gainers; 3. Funds vs. Equities; 4. Fund risks/rewards. All per prices as of 1/11/24.