Is a big market cap a good thing for this type of covered calls product? What would they usually do here? play more or play bigger? My understanding of how to hedge ULTY is weak compared to MSTY.
Yes, they can’t hold so much cash so ultimately all the inflows (which are fueling the AUM) have to be deployed into underlying stocks and options. For now it’s not a problem. Perhaps at $20B or $100B, then it might get a bit more challenging as the underlying stocks need the liquidity to support the scale.
To hedge, you could consider puts on ULTY, puts on it’s top underlying, inverse LETFs (like SQQQ). They filed for a new ETF called SLTY (which is inverse ULTY), but that hasn’t released yet.
Is a big market cap a good thing for this type of covered calls product? What would they usually do here? play more or play bigger? My understanding of how to hedge ULTY is weak compared to MSTY.
Yes, they can’t hold so much cash so ultimately all the inflows (which are fueling the AUM) have to be deployed into underlying stocks and options. For now it’s not a problem. Perhaps at $20B or $100B, then it might get a bit more challenging as the underlying stocks need the liquidity to support the scale.
To hedge, you could consider puts on ULTY, puts on it’s top underlying, inverse LETFs (like SQQQ). They filed for a new ETF called SLTY (which is inverse ULTY), but that hasn’t released yet.
3B market cap by Aug 15th