"Synthetic Bonds"
That poor, oblivious soul in the picture is the typical American investor who tries picking stocks himself...or who pays a "pro" to do it for him. Either way, he is destined to under-perform the market in general...and he will get crushed in the inevitable bear market one day.
As detailed in our Home Page, we solved those problems years ago when interest rates were much higher by combining T-bills and S&P Index options. Today, a new and safe source of income is required, since T-bills just don't yield enough anymore.
The solution is a "SYNTHETIC BOND"!
There are several ETFs tied to either the S&P 500 or Nasdaq 100 Indexes today which do certain things to generate substantial monthly dividends which equate to annual yields of 10% or more.
Most accomplish this by frequently selling call options against their associated Index or a percentage of it to generate income, which is then paid out to investors each month as dividends. These particular dividends, by the way, get much more favorable tax treatment than ordinary dividends, and can even become tax free to the investor's heirs!
This process of selling calls generally limits...but does not completely eliminate...the upside potential of the ETF price. If the S&P 500 or Nasdaq 100 goes up, say, 20% in a year, the price of the associated ETF itself might only capture 60% of that, or 12%. (But the dividends keep flowing!)
On the other hand, if the Indexes should decline, the market price of the ETF will often fall just as much. (But again, the dividends keep flowing!)
So...while the ETF may pay out nice dividends, it's market price has limited upside potential and very definite downside risk. The dividends might cushion things a bit in a crash, but the ETF market price could still suffer along with the market.
So the challenge is...how do we create something that will allow us to collect those attractive dividends without having to worry about market risk?
It is done by using a very specific mix of options which : GIVES UP ANY ETF PRICE APPRECIATION in return for DOWNSIDE PRICE PROTECTION!
We just want those dividends...and this technique does not effect the dividends!
The result is a package that keeps generating those dividends yielding 10%,+ while experiencing little overall volatility!
A "SYNTHETIC BOND" if you will!
The investor can then use the "bond" to either
1. Replace the T-bills in our strategy of years ago...shown on the previous page... which would allow the investor to own the S&P 500 with essentially no downside risk!
...or
2. Simply use it as a source of high yield income!
Don't let that piano land on you!
*********
For specifics:
Use Subject: "Synthetic Bonds"
No Charge