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Animal Spirits Podcast

Talk Your Book: J.P. Morgan's Covered Call Strategies

Aug 28, 2023
Hear from Hamilton Reiner, MD, PM, and Head of US Equity Derivatives at J.P. Morgan Asset Management as he discusses the construction of JEPI, how volatility affects yield, the popularity of the strategy. Also, learn about the covered call strategy, portfolio construction, risks and benefits, and the unexpected success of JP Morgan's approach.
28:36

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

  • JEPI, a covered call strategy, aims to provide a smoother ride and be less susceptible to downside risks.
  • The equity premium income strategy offers a more balanced approach by providing both dividends and options premiums, appealing to risk-averse investors seeking a predictable income stream.

Deep dives

The JP Morgan equity premium income ETF (JEPI) has become the largest active ETF in the industry, with almost $30 billion in assets.

JEPI is a covered call strategy that focuses on low volatility and high-quality stocks, providing investors with lower market volatility and a stream of income from the covered call options. The strategy has gained popularity, attracting investors who are risk-averse and seeking steady income in retirement. The income is paid out monthly, and the fund aims to provide a 7-9% distributable income through a disciplined approach of selling options with a 30% chance of finishing in the money, adjusting the strike prices depending on market volatility, and laddering and staggering the options. While the strategy may not outperform the S&P 500 in bull markets, it aims to provide a smoother ride and be less susceptible to downside risks.

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