Thread: SPXX

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  1. #1
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    SPXX

    Bought this a year ago and itís a coveted call closed end fund that sells covered calls on its holdings. The last three months itís been acting weird. The premium over the nav was like 15% today. I was reading some articles on it and no one could figure out why. It was paying out about 6.2 percent in distributions too. I ended up selling today with a 22% gain in just over a year. It sort of rattled me that the pricing made no sense so I figured best to take gains and repurchase if it starts trading at a discount. Hope I didnít shoot myself in the foot. Anybody know anything about this closed end fund? It doesnít use leverage so it seems weird.

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  3. Stocks/Investments Moderator boneil's Avatar
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    #2
    only a guess, but.....

    The VIX has been elevated this year, compared to last year. So selling calls would collect more premium than last year. There are many things that affect the pricing of options. So when violitlity starts jumping around the value of options jump around regardless of the price of the markets. Call options, can go up, even as price of the underlying goes down. I would bet that what you are seeing, is the result of the VIX, and other VIX related products.
    Knowledge is the Kryptonite of Liberalism

  4. Member
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    #3
    I did some reading over the weekend about the covered call CEF's. Some of them actually include a return of capital in their managed distributions so they are destructive distributions. The problem is trying to determine if the distribution is from option income only or also from proceeds from shares that were called away because under the tax code they treat both as return of capital. The article said you can compare the growth of the NAV and if it exceeds the distribution rate then the distribution should not be destructive. I'm going to have to do some more reading on these products. I do like the concept for income as part of a diversified portfolio but I need to understand them more.