Nuveen S&P 500 Dynamic Overwrite Fund

SPXX

Market cap $311M

I know, I know. This levitating stock market feels like a bubble that will burst any day.

CHICAGO--(BUSINESS WIRE)--The Boards of Trustees of Nuveen S&P 500 Buy-Write Income Fund (NYSE: BXMX), Nuveen Dow 30℠ Dynamic Overwrite Fund (NYSE: DIAX), and Nuveen S&P 500 Dynamic Overwrite Fund (NYSE: SPXX) have approved a proposal to merge the funds. The proposed mergers, if approved by shareholders, would combine BXMX and DIAX into SPXX. The mergers are intended to create a larger fund with lower net operating expenses and increased trading volume on the exchange for common shares.

Volatility is back! And we contrarians know what to do: Get ready to buy.

Nuveen S&P 500 Dynamic Overwrite Fund has significantly underperformed its buy-write fund peers, ranking last in total return compared to alternatives like ETY and SPYI. Despite slightly lower drawdowns, SPXX offers little downside protection, mirroring the S&P 500's risks due to its options strategy. The current S&P 500 valuation is historically high, making the macro environment unfavorable for new investments in SPXX.

The media is still obsessed with the “sell America” trade.

SPXX offers a high 7.8% yield using a covered call strategy, making it ideal for investors seeking supplemental income alongside traditional S&P 500 ETFs. The fund's dynamic option writing provides resilience during downturns and steady distributions, but caps upside, leading to long-term underperformance versus SPY. SPXX is best used as a portfolio complement for income, not as a core holding, due to its lower total return compared to traditional index funds.

Retirees should consider defensive investments like dividend-generating funds instead of growth stocks, especially during market downturns. The Nuveen S&P 500 Dynamic Overwrite Fund offers a strategy to generate income through covered calls, providing a 7.8% yield. SPXX limits downside risk while capturing upside potential, making it a safer bet in volatile markets compared to higher-yield, higher-volatility funds.

Trade tensions ratcheted up to 11 this week, and I know that for many readers the wild swings we're seeing can feel sickening.

Nuveen S&P 500 Dynamic Overwrite Fund uses a buy-write strategy to generate income, offering a 6.7% distribution yield by writing call options on the S&P 500. SPXX's strategy caps upside potential, making it suitable for income-focused investors but less ideal for those seeking long-term capital appreciation. The fund underperformed the S&P 500 index over the past decade, delivering 140% ROI compared to the index's 240% due to its capped gains.

We've seen more choppiness in the markets in the last couple of weeks. That once again highlights why we should—dare I say need to—own one of the lowest-volatility, highest-paying investments I know of.