They provide study results on benefits of this strategy while pointing out that the option-writing strategy will underperform during strong markets. The Cboe DJIA BuyWrite Index (BXD) is a benchmark index that measures the performance of a theoretical portfolio that sells DJX call options, against a portfolio of the stocks included in the Dow Jones Industrial Average. While the CEF does invest 100% based on this index, it does provide a guide to their strategy. DIAX Blended Benchmark: 55% Cboe DJIA BuyWrite Index (BXD) and 45% Dow Jones Industrial Average (DJIA). Nuveen Dow 30 Dynamic Overwrite fund is designed to offer regular distributions through a strategy that seeks attractive total return with less volatility than the Dow Jones Industrial Average (DJIA or “Dow30”) by investing in an equity portfolio that seeks to substantially replicate the price movements of the DJIA, as well as selling call options on 35%-75% of the notional value of the Fund’s equity portfolio (with a 55% long-term target) in an effort to enhance the Fund’s risk-adjusted returns. For that bonus in income strategy, the managers collect 92bps in fees. DIA scorecard Nuveen Dow 30SM Dynamic Overwrite Fund reviewĭIAX has $593m in AUM and provides investors with a 7.5% yield. Seeking Alpha has given this pattern a "B+" grade. While the yield is not much, checks are monthly, with the 1st payment each quarter the smallest. compiled by Author DIA distributions review The complete holdings are as follows, with the Top 10 stocks representing 55% of the weight. The Top 5 sectors are 85% of the portfolio weight. Source: Index Methodology DIA holdings review Constituent changes are typically announced one to five days before they are scheduled to be implemented. Rather, changes in response to corporate actions and market developments can be made at any time. There is no annual or semi-annual reconstitution. Changes to the indices are made on an as-needed basis. Companies should be incorporated and headquartered in the U.S., and a plurality of revenues should be derived from the U.S. Maintaining adequate sector representation within the index is also a consideration in the selection process for the Dow Jones Industrial Average. The Index Committee monitors whether the highest-priced stock in the index has a price more than 10 times that of the lowest. Since the indexes are price weighted, the Index Committee evaluates stock price when considering a company for inclusion. While stock selection is not governed by quantitative rules, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth and is of interest to a large number of investors. The DJIA is managed by an in-house Committee and the following describes the maintenance process. Since 1896, I calculated the DJIA has had an average price gain of 5% since 1987, the Annualized Total Return is about 11%. It also explains, IMHO, why stocks with extremely high prices will never be considered. Thus, when a stock splits, its effect on the index is diminished. Its unique feature is the price-weighted nature of the Index: Higher the price larger the weight in the Index. The DJIA was first calculated in 1896, only the Dow Jones Transportation Average is older. The index covers all industries except transportation and utilities. The Dow Jones Industrial Average ® (The Dow ®), is a price-weighted measure of 30 U.S. DIA started in 1998.ĭIA has $28.7b in AUM and provides investors with a 1.9% yield. The Trust’s Portfolio consists of substantially all of the component common stocks that comprise the DJIA, which are weighted in accordance with the terms of the Trust Agreement. The investment seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Dow Jones Industrial Average (the “DJIA”). The SPDR Dow Jones Industrial Average ETF Trust was launched by and is managed by State Street Global Advisors. SPDR Dow Jones Industrial Average ETF review While history is only a year, the results are typical for this pairing type: more income coupled with lower return compared to the standard ETF. I will also review the SPDR Dow Jones Industrial Average ETF ( NYSEARCA: DIA ) and then compare if investors benefited from DIAX’s income-enhancing strategy. One fund writing Calls against the Dow Jones Industrial Average is the Nuveen Dow 30SM Dynamic Overwrite Fund ( NYSE: DIAX ), which I review here. (This article was co-produced with Hoya Capital Real Estate) Introductionīefore the FOMC started pushing up short-term interest rates in 2022, income investors were getting squeezed unless they entered the riskier parts of the fixed income market or turned to option-writing equity funds.
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