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Get Think Tanked Distilled – Options ETFs with Sylvia Jablonski, Jay Pestrichelli and Meb Faber

Investors are exploring option income strategies among various alternatives to traditional income strategies. Even as yields on Treasury bills have pushed north of 5%, funds using weekly and daily expiration option strategies aiming to generate yields have captured income seekers’ imaginations. To discuss these products and options strategies, in general, the ETF Think Tank welcomed Sylvia Jablonski, the CEO/CIO of Defiance ETFs, Meb Faber, the CEO/CIO of Cambria Funds, and Jay Pestrichelli, the Co-Founder of ZEGA Financial. Each of their firms offers option-based strategies as part of their product lineup.

As for why ultra-high yield option income strategies are gaining traction now, Pestrichelli says that some investors are considering “alternative” income in an environment where bonds are experiencing steep losses. It started in 2021, but some investors saw the benefits in 2022 when they offered some downside protection in addition to the high yield. Jablonski, whose firm offers 0DTE fund strategies, adds that having these potentially costly and time-consuming strategies in an ETF wrapper helps compliance feel more comfortable and helps fill a need for clients. Faber agrees that options can be a big pain for investors, especially advisors with hundreds of clients. Today, you can get pre-packaged option strategies and pick the product that works best for you.

Current 5% yields on Treasury bills have been a point of interest for many investors that may feel like they’ve won the lottery. Options strategies still offer benefits because the return paths can be very different relative to other asset classes. Jablonski notes that even if interest rates go back to 2-3%, options income strategies may continue to be attractive because the high yields are still obtainable. With inflation still lingering in the background, the potentially faster turnaround of income with options can be a big advantage.

While most people think of covered call strategies using equities, the yields on fixed income covered calls have the potential to be substantial, according to some investors. Faber says that there’s a generation of younger people discovering things for the first time – 7-8% mortgage rates, 5% Treasury bill yields and nearly two years without a record high in the S&P 500. Investors are beginning to realize there’s an ocean of investments available, especially in the bond market. With so many different types of bonds out there – sovereign, corporate, TIPS, etc. – there’s an element of people not really understanding the flavor of bonds, but it’s getting more attention now.

All three panelists agree that covered call strategies work best when distributions are reinvested. It’s not a “set it and forget it” strategy. You want to maximize the income capture and the compounding effect. The pile of cash from premium income isn’t doing anything for you if you don’t reinvest it. You need to put it back to work.

Other key takeaways:

  • Over the past couple of years, option strategies have emerged as a good portfolio alternative when stocks and bonds remained tightly correlated. The aim for these investors is to find strategies that might offer diversification benefits and potential yield.
  • Options strategies are an opportunity to leverage volatility and that makes earnings season an enticing time of year. Pestrichelli says that this absolutely impacts how you use options and sometimes you can get as much as a couple weeks of volatility to take advantage of.
  • Faber explains that a lot of people two years ago thought that the max drawdown in bonds was around 10%. They’re learning reality the hard way now. Historically, the yield curve has been fairly predictive. An inverted curve often works for T-bills & gold. A normal curve works for stocks. A steep curve works better for REITs.
  • A piece of advice from Pestrichelli – You have to consider your worst-case scenario first. Manage your risk.


All investments involve risk, including possible loss of principal.

The material provided here is for informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

The value of investments and the income from them can go down as well as up and investors may not get back the amounts originally invested, and can be affected by changes in interest rates, in exchange rates, general market conditions, political, social and economic developments and other variable factors. Investment involves risks including but not limited to, possible delays in payments and loss of income or capital. Neither Toroso nor any of its affiliates guarantees any rate of return or the return of capital invested. This commentary material is available for informational purposes only and nothing herein constitutes an offer to sell or a solicitation of an offer to buy any security and nothing herein should be construed as such. All investment strategies and investments involve risk of loss, including the possible loss of all amounts invested, and nothing herein should be construed as a guarantee of any specific outcome or profit.  While we have gathered the information presented herein from sources that we believe to be reliable, we cannot guarantee the accuracy or completeness of the information presented and the information presented should not be relied upon as such. Any opinions expressed herein are our opinions and are current only as of the date of distribution, and are subject to change without notice. We disclaim any obligation to provide revised opinions in the event of changed circumstances.

The information in this material is confidential and proprietary and may not be used other than by the intended user. Neither Toroso or its affiliates or any of their officers or employees of Toroso accepts any liability whatsoever for any loss arising from any use of this material or its contents. This material may not be reproduced, distributed or published without prior written permission from Toroso. Distribution of this material may be restricted in certain jurisdictions. Any persons coming into possession of this material should seek advice for details of and observe such restrictions (if any).

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