Equity STRIPS ETF - is it possible?
Equity STRIPS ETF - is it possible?
Treasury bonds can be turned into STRIPS whereby the principal and coupon payments trade separately. Would it be possible to do the same with a pair of ETFs that hold swap contracts equal to the dividends and price action of a basket of stocks, that then trade independently? Probably results in some weird tax gymnastics, but that doesn't seem insurmountable.
Re: Equity STRIPS ETF - is it possible?
A deep-in-the-money call basically entitles the holder to just the price action.Walkure wrote: ↑Mon May 10, 2021 5:21 pm Treasury bonds can be turned into STRIPS whereby the principal and coupon payments trade separately. Would it be possible to do the same with a pair of ETFs that hold swap contracts equal to the dividends and price action of a basket of stocks, that then trade independently? Probably results in some weird tax gymnastics, but that doesn't seem insurmountable.
If you only want the dividends, go long the stock and write that call.
Re: Equity STRIPS ETF - is it possible?
You could, but that seems like a lot of work rolling options, especially if you're trying to diversify across hundreds of dividend paying stocks. Surely there must be a market for a set-and-forget product that does this automatically. In theory, the imperfect correlation between prices and yields would mean that holding both hypothetical ETFs and rebalancing could even produce a premium over simply going long the stock.Thesaints wrote: ↑Mon May 10, 2021 5:25 pmA deep-in-the-money call basically entitles the holder to just the price action.Walkure wrote: ↑Mon May 10, 2021 5:21 pm Treasury bonds can be turned into STRIPS whereby the principal and coupon payments trade separately. Would it be possible to do the same with a pair of ETFs that hold swap contracts equal to the dividends and price action of a basket of stocks, that then trade independently? Probably results in some weird tax gymnastics, but that doesn't seem insurmountable.
If you only want the dividends, go long the stock and write that call.
Re: Equity STRIPS ETF - is it possible?
You can do it on SPY…
Not possible to gain by holding dividend flow separately. There would be a simple arbitrage available, if that were the case.
Not possible to gain by holding dividend flow separately. There would be a simple arbitrage available, if that were the case.
Re: Equity STRIPS ETF - is it possible?
Dividend swaps exist, and until September the Reality Shares DIVS ETF (DIVY) was available as a way for retail investors to access that market.Walkure wrote: ↑Mon May 10, 2021 5:21 pm Treasury bonds can be turned into STRIPS whereby the principal and coupon payments trade separately. Would it be possible to do the same with a pair of ETFs that hold swap contracts equal to the dividends and price action of a basket of stocks, that then trade independently? Probably results in some weird tax gymnastics, but that doesn't seem insurmountable.
https://www.businesswire.com/news/home/ ... -NYSE-DIVY
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Re: Equity STRIPS ETF - is it possible?
Fascinating, I had never heard of this fund.vineviz wrote: ↑Mon May 10, 2021 7:01 pmDividend swaps exist, and until September the Reality Shares DIVS ETF (DIVY) was available as a way for retail investors to access that market.Walkure wrote: ↑Mon May 10, 2021 5:21 pm Treasury bonds can be turned into STRIPS whereby the principal and coupon payments trade separately. Would it be possible to do the same with a pair of ETFs that hold swap contracts equal to the dividends and price action of a basket of stocks, that then trade independently? Probably results in some weird tax gymnastics, but that doesn't seem insurmountable.
https://www.businesswire.com/news/home/ ... -NYSE-DIVY
Re: Equity STRIPS ETF - is it possible?
I think these dividend futures might be related to your question.
https://www.cmegroup.com/trading/equity ... tures.html
https://www.cmegroup.com/trading/equity ... tures.html