Even though the fixed income market seems to be in good shape, there’s still a good use case for diversifying one’s portfolio yield.
For bond strategies, credit spreads remain a bit tight. This shouldn’t particularly affect long-term investment-grade strategies, but the risk/reward profile for high yield bonds may be a bit unfavorable.
That said, high yield bonds historically offered more benefits than their namesake may imply. High yield exposure helped investors better diversify their sources of yield for their portfolios.
If the high yield market is facing few headwinds, it may be time to look for additional means to bring in yield outside of investment-grade bonds. One alternative method to do so is through an equity options strategy.
PAPI Brings Derivatives & Options Income
These strategies generate robust yield for investors by writing call options on an underlying selection of stocks. For a better look at how these strategies work, take a closer look at the Parametric Equity Premium Income ETF (PAPI ).
PAPI is an actively managed fund that invests in U.S. companies with historical precedent for providing a high degree of income. Of course, this is paired with a call-writing strategy to bolster overall yield.
As such, the fund offers two distinct vehicles for attracting new income. Along with the call writing, the fund’s portfolio itself can provide distinctive dividend yield for its investors.
This also comes with the added benefit of potential capital appreciation. PAPI can provide some long-term returns for its investors, should its underlying portfolio post strong results.
Right now, the ETF is offering an extremely attractive yield for its investors. As of December 31, 2024, PAPI has a dividend yield of 7.54%. This yield is paired with strong yearly capital appreciation. The fund’s NAV has jumped more than 11% in the last year, as of January 15, 2025.
For more news, information, and analysis, visit The ETF Yield Channel.
