Cryptocurrency Q&A
What is the downside of a covered call ETF?
What is the downside of a covered call ETF?
CryptoWanderer
Thu Sep 26 2024
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6 answers
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Could you elaborate on the potential drawbacks of investing in a covered call ETF? Are there any risks associated with this type of investment that investors should be aware of? Additionally, how might the performance of the underlying assets impact the returns of a covered call ETF, and what strategies can investors employ to mitigate any potential negative effects?
6 answers
Dario
Sat Sep 28 2024
Tax concerns are a vital aspect of investing in covered-call ETFs.
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JejuSunshineSoulMateWarmth
Sat Sep 28 2024
When engaging in this strategy, investors should be aware that a significant portion of their total returns may be taxed as ordinary income.
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Stefano
Fri Sep 27 2024
This is because covered-call ETFs often generate income through the sale of options, which is then distributed to shareholders.
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CryptoVanguard
Fri Sep 27 2024
Ordinary income tax rates are typically higher than those applied to capital gains, meaning investors may face a heavier tax burden.
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Lucia
Fri Sep 27 2024
Consequently, holding covered-call ETFs for a longer-term period could result in paying more in taxes compared to selling off capital gains.
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