AIPIExploring the AI Covered Call ETF: AIPI
Let’s take a look at AIPI, a covered call ETF that focuses on stocks in the AI sector and trades on the US stock exchange. If you're analysing the chart, you might notice that dividend indicators don’t appear. That’s because this ETF doesn’t technically pay dividends. Instead, it collects dividends from its holdings, pays taxes on them, and distributes the rest to investors as taxable income. This is important to understand for tax planning, as it may impact how you report income depending on where you live.
The Strategy Behind AIPI
Being a covered call ETF, it limits your upside, especially in strong bull markets. However, the fund managers often adapt by writing covered calls at higher target prices when markets are bullish, capitalizing on demand for options. Most option buyers lose, which benefits the ETF's income strategy.
If you dive into the distributions and run the numbers, you’ll see that AIPI has been yielding approximately 30% annually. It’s a strong performer, but as with any investment, diversification is key. You might want to start small—maybe one or ten shares—and hold it for a few months to see how it performs for you.
Research the Components
When you look at AIPI, understanding its holdings is crucial. While the components might not show up directly on TradingView, a quick Google search can reveal the ETF's portfolio. You can also use benchmarks like SMH (a semiconductor ETF) as a rough gauge, but digging into the individual stocks within AIPI will give you a clearer picture of its trajectory.
A Trading Strategy Idea
Here’s a potential strategy for those interested in short-term moves:
Buy before the ex-dividend date.
Hold to collect the distribution.
Set a limit order at your purchase price or slightly higher to sell after the payout.
This approach could net you around 30%/12 per month, depending on timing and execution. Of course, this requires monitoring and is not guaranteed.
Other Covered Call ETFs to Explore
While AIPI is exciting, there are other options out there depending on your region and goals. For example:
On the TSX (Canadian markets):
BANK or UMAX, which focus on Canadian stocks or are hedged to the Canadian dollar.
On the US markets:
QDTE, a weekly payout ETF.
Run the math on annual distributions and compound that over time. If you’re young, this can be a powerful strategy for long-term growth.
Final Thoughts
Covered call ETFs like AIPI aren’t a secret ATM, and you shouldn’t expect them to churn out cash indefinitely. However, they can be a great addition to a diversified portfolio, especially for income-focused investors. I personally own AIPI and think it’s flying under the radar. Many websites don’t display full annual gains until the ETF has traded for at least a year, so it might not yet be on everyone’s radar.
Do your research, calculate potential returns, and explore different strategies to see what works for you!
