The Untold Truth about SVOL: What I learned from my meeting

[@Income_Architect]

Thanks for watch! kzbin.info/door/sc8a4xcOfGiwR4Bu8UZWMQjoin Retirement Money Secrets:👉 www.amazon.com/shop/incomearchitect/list/CGU86DCD1HML?ref_=aipsflist Buy Buy me a Sweet Tea:👉 ko-fi.com/incomearchitect Income Factory Book 👉 amzn.to/3ZCzp1p Affiliate link Seeking Alpha 👉 www.seekingalpha.link/3RJ5GCX/2QZRGT/

[@jaygold4467]

This is an excellent video by someone who know exactly what is going on with this fund. For a fund with active management this fund should be managed much better. I'll give them until the March distribution to straighten their mistakes out. If they can't get it right by then I'm out. We all owe Brad a debt of gratitude for holding the management t accountable. NO neutral funds! Bravo Brad!

[@Income_Architect]

Thanks. 🙏

[@frankvullo-f3g]

Brad thanks for pressing them. I had to sell out when it temps bounced over 21. Down and to the right we want up and to the right .and then lowering the dividends just not for me any longer. I feel much better/safer in SPYI/QQI.

[@Income_Architect]

I have that feeling.

[@freeagent.87]

Excellent analysis, this is 10% of my holdings so i really should pay closer attention

[@Income_Architect]

Something to think about. I will download everyday for a few weeks to see how things change.

[@johnwoodman595]

Excellent work again

[@Income_Architect]

Thank you

[@lindsaynewell6319]

Thanks for this Brad - clearly a lot of work went into it. One of the key takeaways from your interview with Si Katara that gave me confidence in TSPY was that he ran an extended test on his model using his own money before unleashing TSPY on the masses. It feels a bit like Simplify are making it up as they go along with SVOL.

[@Income_Architect]

Thank you for bring that up. That really gives me something to think about. You would have to wonder what would they do in 2008 - 2009 market.

[@dberry256]

Thank you Brad!

[@Income_Architect]

Your welcome.

[@HelloMartians]

Thanks for adding value, Brad

[@Income_Architect]

My pleasure! 😇. Thanks for watching.

[@stevenbrisbey9822]

Awesome info Brad! Thanks for the detailed explanation of what has been happening with SVOL. Appreciate the education you’re providing to those of us in the learning stage of income investing.

[@Income_Architect]

Thanks for watching.

[@ClintonSiegel]

Brad, thank you very much. Incredible investigation, deep dive and next steps. You are making me a better investor. Thanking for doing the interviews, research and videos..

[@jintz2]

You’re the man for going into all this detail Brad!

[@Income_Architect]

Thanks for watching.

[@EnSpadeErEnSpade]

Holding without adding into it. I have some losers within my portfolio, if SVOL turns into one so be it. The same goes for the synthetics gang from Roundhill. These are my vehicles to load up in other funds and stocks, and I love them so far. When I see a good opportunity, I will grab a position in YBTC for the same purpose. If the output is poor and the NAV erodes, that's a future tax cut, I need some of those as well. Gracias, Brad!

[@Income_Architect]

Holding myself also. I would like to see some changes.

[@TraderBgood]

Brad great video. What do you think about holding a REIT like ABR making 12% and then selling covered calls on them to maybe jack your return up to 18% or so?

[@Income_Architect]

I have zero REITS and if I have to sell a call on something I am not in the right funds. I do not invest mREITS or REITS.

[@nikolaygannev4294]

One of my favorite funds. At least it was. It had great performance beating S&P by end of 2023 for 2 and half years since inception. 2024 everything started to change - bonds, yields, so many changes in the fund and consistently dropping distributions. Still holding but also watching and may sell some in the next months. Thanks for the video and work you put in.

[@Income_Architect]

It was my favorite fund. Starting to be on the fence. But still holding.

[@rickbold9337]

I sold 1/3 last two weeks ago and will sell another 1/3 next week. I hate the drastic drop on a modest down day and the distribution is going down as well. Much better covered call funds that pay higher with little NAV erosion

[@Income_Architect]

Starting to feel the same way.

[@cristobalcardona4135]

Got out of SVOL a long time ago!

[@Income_Architect]

Waiting for a small recovery to get out ahead.

[@jeancarloferreira9770]

I still feel very comfortable holding svol. In fact I've been buying more every day lol. I am fairly confident that once that market turns risk ON again svol will go back to ATH nav. Their distribution target is FFR + 10% according to larry. And I think that's totally okay with me. I dont need a 50% yield where the nav bleeds out. Just throwing out my 2 cents.😂 Keep up the great work.

[@Income_Architect]

Still holding myself but slightly more concerned

[@jasonstupak4535]

Thanks Brad!

[@Income_Architect]

You're welcome!☺️

[@WoodUCreate]

Excellent topic. Thanks for your dedication to getting to the details Brad. It's been concerning since they dropped their dividend, I hope with their tweaking of the fund they're able to get it working more stably going forward.

[@Income_Architect]

@WoodUCreate. I am holding on. But its been a few months that they started to make adjustments. Let's make them and move on. Going to watch them closer now that I see them adjusting things daily.

[@LansingFish]

Everything is on sale today ❤

[@Income_Architect]

Everything is on sale.

[@tacticalstockscalper6081]

Thanks for the video Brad! Great stuff ❤

[@Income_Architect]

Glad you enjoyed it!

[@ddelmarsmith]

Price chart down and to the right. Dividends decreasing over time. The 2 most important aspects for living off income are broken so far. Good lesson for waiting to see how an investment behaves over time and different economic periods.

[@Income_Architect]

Totally agree

[@Yieldthief]

Great video brad 👌 I infact added more SVOL on this dip, current average is now 20.91 so see how it goes next few weeks. Im sure u have heard of my cousin armchair income, he is still holding for now to, hope for a fast bounce back , good testing time now

[@Income_Architect]

He sold half in his last email.

[@Yieldthief]

@@Income_Architect yes correct!!! Lets hope for a quick bounce back when vix drops

[@janoz06]

Thanks you Brad for the great info.

[@Income_Architect]

Thanks for watching.

[@richardfromtexas]

Thank you for the great work on this one. 9:32 However, I disagree that the IVV 16% is not earning anything. This trade replicates a short-term Treasury bill because the futures contract price is higher than the current S&P 500 index by the theoretical gain from the 3-month T-bill, adjusted for dividends. You’re not wasting liquidity; the trade earns the risk-free rate embedded in the futures price and benefits from favorable tax treatment, with 60% of futures gains taxed at long-term capital gains rates. For example, if the S&P 500 is at 6,000 and the annualized T-bill yield is 5%, the 3-month futures should trade at approximately 6,075 (6,000 + ). The 75-point gain reflects the risk-free return of the T-bill, and your futures gain would qualify for the advantageous 60/40 tax treatment. I generally like SVOl. However, I sold out in late Dec and currently don’t have a position.

[@Income_Architect]

You can disagree all you want. That was a pass trade. They are no longer in. They confirmed that it was a natural trade so you are smarter than them. They also dropped your distribution having it so clearly it didn’t make enough money for them not drop your distribution. I guess you’re happy with dropping share price and dropping distributions as they change a broken fund. Your answer or example only looked at one side of equation. You totally left of the other side of equation of the IVV price they worked opposite of each other so one gains and one drops per the fund managers. I am so glad they posted that in writing on seeking alpha so I can answer questions of people looking at one side of the equation thinking.

[@Matthew84-x9z]

How about MTBA?

[@Income_Architect]

Down 4% from the August downturn.

[@mikeconnell698]

Great video Brad. I bailed on SVOL a few days ago. When rates truly start coming down, it seems like it will have a better chance making ends meet. Thanks

[@Income_Architect]

I am holding on but it might be a sinking ship. I hope that they start the actually generating some income from the options to make up the difference of the bonds.

[@cmartin3711]

Great info here!

[@Income_Architect]

Glad it was helpful!

[@jkutchma]

I trimmed my exposure. Just from my observation and Dave's help, that it doesn't seem like they truly know what they are doing or don't really have a plan. This is my opinion. Yesterday when the market was down around 1.5 percent, SVOL was down around 2.5 percent. I understand this is one day of data, but with this fund considering all the hedging with in the fund structure, it shouldn't underperform on a down day. If there is something I am missing, please let me know. Dave, your work is much appreciated. I really enjoy your deep dives into these funds and saving us common folk the work. Please continue with this! I haven't found this kind of content on the internet.

[@Income_Architect]

No problem. You are correct they really took a huge VIX hit yesterday. I am all for them but their fund appears to be currently broken. Can it get fixed is the question?

[@5dbcooper]

Yea I sold all svol on Oct 14th for $21.60 I might jump back in but waiting to see how the next few months play out.

[@Income_Architect]

I am really thinking of just getting out of it.

[@RobOToole1]

How mad are these etf managers that engineers are retiring and putting them under a microscope. Lolol. Great work sir! Have a tiny bit in my ira in xvol, svol and zvol but not for much longer. They're double dipping on expense ratio fees too by holding their own funds

[@Income_Architect]

Or propping up other funds.

[@kaosimagery]

You analysis is far more intellectual than mine will ever be. But my pea sized brained thought there was something up with SVOL. Back in the big August 5th dip, it dropped significantly but recovered significantly. Lately, in these smaller dips, it drops more than any other holding I have - and I have a lot of the high yielding covered call ones - and is slow to recover some, and never recovers fully. That on top of the reduced distributions, SVOL is losing it's luster to me. Hopefully they will get things back on track, if not, I may have to move on. Thanks for your detailed info.

[@Income_Architect]

@kaosimagery going to watch them for a few more weeks. I am hoping this is only a short term issue and not a long term problem. Your comment is putting words to my complicated explanation of the same problem that I was seeing.

[@gregnyberg8262]

I would prefer if SVOL stayed true to the -0.25X on VIX and harvested the roll yield reliably and didn't try to eek out pennies of additional income using bizarre holdings (muni bonds?) and options other than VIX hedges. If I wanted CC on SPY I would buy something else. Trying to do too much in a single fund to keep assets, perhaps.

[@Income_Architect]

So you’re ok with a 5 to 13 yield and not 15%.

[@FragileNM]

How much weight do you put into MorningStar? On Ally, SVOL has been going back-and-forth between four and five stars.

[@Income_Architect]

Non personally. But I have not followed it to closely. Just because something under preformed I don’t through it aside quickly. But I do care if something fundamentally changed and that is what we are seeing. Covered calls on SPY. Something I have not seen them do before.

[@alexlinenslaundry1827]

Hey Brad, great analysis. Q: do you think ZVOL suffers from the same affliction as SVOL or is this isolated to SVOL? Can you compare. TY. Also just my 2 cents, my observation is that SVOL will continue to have NAV erosion unless they begin learn to hedge properly, in comparison ZVOL, although younger since inception 4/23, has had less to NAV erosion, but my recent comparison and superimposing respective graph upon each other, It seem ZVOL may be going similar route. Plz check my work. Cheers. One last thing, both these product are best bought on high VIX day and sold on low VIX days since they they mimic the VIX inversely.

[@Income_Architect]

ZVOL will have the same issue 4x

[@andrewd9633]

@@alexlinenslaundry1827 I do this with SVIX 1x short vix futures

[@ChunkUhDunk]

I never bought. Was one of those holdings I wanted to wait and see. Hopefully they take yours and investors' comments into consideration moving forward.

[@Income_Architect]

Love the fund up until a few months ago. The structure got broken. They need to adjust and its been a few months now.

[@moneekdilawari4508]

Brad - it could be that they were hedging their IVV position by buying a puts on the ES futures. They could have closed on the put position when the S&P500 recently dropped and still have the IVV position intact. They are not putting money under the bed, it's just a method to be delta neutral on their S&P500 position.

[@Income_Architect]

They held the ES futures for months not days. They sold the IVV position so you did not finish the video. They were delta-neutral for months. So you're saying it's not putting money under the bed when they are only making money on the delta Natural time decay. Your distributions are dropping like a rock. Your price is dropping like a rock and people are like they are making money. Any other comments?

[@knightravine]

​@@Income_Architect i am thinking 'Delta neutral for months ' waiting for signals that never came to press the red button on the video game controller.

[@leoz6338]

Thank you for the deep dive. I think you should consult w them on a 3 month contract. Do we have any history with these folks being able to make money using covered calls on SPY or is this all brand new?

[@Income_Architect]

I see no history. Looking at the first ones they sold I see no issue with them. So lets see what they do. I am on a "hold" with them. I talk to Eric every few months. No need to consult. I just see the feedback from Seeking Alpha and other places.

[@leoz6338]

@Income_Architect double secret probation for now.

[@Ciborium]

Thank you for your investigation and holding their feet to the fire. I am now wondering if they are playing three card monte on us. Telling us they are earning income from VIX Futures but shuffling the money to bonds (which only puts more revenue in their own pockets) and putting the rest in the figurative mattress. I will be holding and not buying anymore SVOL until they get a team that isn't as incompetent as the current team, and you give us the Buy or Sell opinion.

[@Income_Architect]

I like the first options they sold but stopped selling them.

[@spain77777]

I am really considering transferring my SVOL to BTCI

[@Income_Architect]

Not sure I would go that far yet.

[@CalmerThanYouAre1]

The fund is just unnecessarily complex. There are probably better ways to go that don’t require fund managers with a questionable track record to nail a complicated strategy. I’d rather have CLOZ, QQQI and BTCI allocated to produce a blended 15% with relatively lower volatility than the market. Also very easy to understand. And if I wanted more downside insurance, I’d buy out-of-the-money TQQQ puts when the technicals indicate the market is overbought with a portion of the income.

[@Income_Architect]

Thanks for sharing. Looks like it might be broken.

[@sweetdividends]

What the BUCK indeed. Maybe should be renamed Sidelined Vault of Liquidity (SVOL)

[@Income_Architect]

What the Buck indeed.

[@Chip-x7g]

I’m thinking of bailing, by them adding S&P exposure it becomes less of an alternative to me. Might just sell and put it in SPYI

[@Income_Architect]

Holding for two more weeks and will do a follow up video on their holdings.

[@169Tomh]

Nice job Brad, SVOL has been slowly slipping its div and NAV armchair also sold out a couple months ago and then went back in. I like this ETF but……big slide today everywhere except bitcoin, I feel like we are in the beginnings of a correction……. Donald’s not gonna like that lol. Nice work and hey did you see the post from Ray Lani and his goof up? Please check into that Cheers

[@Income_Architect]

Thanks. I saw Armchair lowed his holding the other day. I left the group so I can’t see his post.

[@169Tomh]

@ please look he efffed up by mistake and hates it….have a good weekend sir

[@169Tomh]

@ I also copied to you in a past post yesterday for what it’s worth

[@rickcossey6211]

They haven’t “earned” the distribution in at least a year. The real issue is with the ETFs they hold that hasn’t earned the distribution either. Double whammy. I tracked this one really close for a long time (2 years) and never bought any. It is still a mess and continues to highlight the management issues at Simplify.

[@Income_Architect]

Now I haven’t talked about the management issues. I’m starting to think it’s bigger than we might think.

[@deehendon4204]

You earned an ice tea today. Great material for the uninitiated.

[@Income_Architect]

Thanks for watching 👍

[@may-maytanymaytany_s3417]

❤🎉😊

[@Income_Architect]

Thanks for watching.

[@respectall4653]

Thats why your my financial advisor 😊

[@Income_Architect]

Thanks just passing along the Information.

[@deehendon4204]

When things seem weird it’s time to move on. Plenty of other products that work and that are understandable.

[@Income_Architect]

Agreed.

[@ThatGuySyndrome]

Looks to me like they holding IVV stock for positive delta's when they want positive deltas. then they buy or sell futures to hedge. Which is what futures are meant for hedge delta's on big funds. If they are trying to keep the portfolio within a certain direcitonal risk but remain short vega with short vol futures. I think it makes sense, complicated but makes sense. Remain as delta neutral as possible. maybe even directional with delta's if managers desire it, and remain short volatility full time. It looks to me like they are balancing their short volatility to direciton ratio with the buying and selling of futures delta's. The correlation of VX futures to Sp500 can vary from calendar to calendar expirations of the futures. So they pretty much putting in a capacitor device with the IVV and /ES hedges to buffer the directional risk. Honestly once your using IVV and /ES futures to delta hedge the actual underlyings matter less other than income generation like bond interest, or short vol premium differences. Ideally they also need more volume/size coming into the fund to sort of keep making the volatility short positions bigger at the best possible times.

[@Income_Architect]

OK sure. IVV was 100% Neutral position 100% confirmed by the fund managers. So your happy that hold you money for 0.72 fee with a neutral position and not make you any money? Now what do you have to say about them selling options on SPY?

[@ThatGuySyndrome]

@@Income_Architect I think it depends how long they might of been holding the IVV shares for. If their plan going forward is to hold IVV shares and never really exit them for tax reasons. It makes sense to always keep a IVV position with stock if the plan is to never exit them and just trade /es delta's against it. IVV does pay dividends quarterly I believe so there is something to maybe holding it full time. In theory they could possibly sell premium against that stock position itself too. Also they probably get a institutional deal if they use /ES to knock delta risk out. It might cost them nothing extra. It might not be "the best" way, but if I understand it somewhat, I think its clever. There is going to be a hedge gap from when the vix is going up to when the actual long vix calls kick in for profit. A direct /es hedge could make up for that distance, then when the vix calls kick in the hedge they take off the short /es futures.

[@Income_Architect]

Clearly, you did not watch the whole video. They sold all the IVV shares. They bought SPY and then started selling SPY options to increase the revenue. They confirmed that they will be selling options to produce the income for te short fall of the future contracts. They are not making the 15% on the current holdings. It might be clever right to the point of giving destructive ROC.

[@ThatGuySyndrome]

@@Income_Architect It does seem like they made a mistake with the IVV and then switched it out. I think I like the IVV and /ES futures way better. It is a very convoluted strategy. Not positive but if they want this fund to be investable by mutual funds currently/future they might need to meet certain holding requirements.

[@Income_Architect]

Well the issue is the destructive ROC. If they can't make the revenue then they are only giving you back your money. I get the whole delta neutral holdings. I cut them a break through the election. The issue is the future distribution cuts. Yes cuts. don't think they aren't coming if they can't generate the revenue with options they will start cutting distributions again. I'm giving them two weeks to figure out their holdings. They can be cleaver with other peoples money. Just don't charge me 0.72 to give me my money back through destructive ROC.

[@HelloMartians]

Does anyone know of any ETF that produces income when the market is in turmoil going up and down? The opposite of SVOL. I can't find any. I want to run some numbers having that ETF and the SVOL at the same time

[@Income_Architect]

Hope someone has an answer for that one. I have some inverse but they don’t pay income.

[@andrewd9633]

VIXY vix short term futures, it’s for holding short term, it went up 6.88% today when SVOL went down 2.54% (doesn’t produce income, but is a good short term hedge if you think the vix is going to spike)

[@HelloMartians]

@@andrewd9633 - thanks for the insight. It seems such an ETF doesn't exist. Maybe @income_architect can come up with his first ETF :)

[@elvispresley6882]

Thank you for all the work you out into this video Brad. Much appreciated. Kind of a newb, so I have a few questions. 1.When you say they roll their contracts, do you mean they sell 30 day, 60 day, and 90 day contracts. After 30 days, the 30 day contracts expire (hopefully out of the money) they then turn around and sell new 90 day contracts, with the original 60 day acting as their 30 day contracts, and the original 90 day contracts now acting as the 60 day contracts? 2. You talk about a rolling spread. It seems like the premium is higher for the longer dated contracts than the shorter dated ones. But it is not clear how you calculate the spread they make off of rolling the contracts. 3. Speaking of the rolling yield, what does the 0.25 number represent? It was included in various examples you provided, including the one for the bond yields. 4. Would love to hear more about where they should park the 16, now 10% sidelined capital. You mentioned a mm fund. You also seem okay with them selling covered calls. Any other ideas? 5. You talked about the distributions dropping because they are making less on the bonds, etc. You also explained why( yield on short term treasuries are dropping). Since yields on longer term treasuries have been rising, what is stopping them from buying 10 yr treasuries for example? They wouldn’t have enough liquidity in the fund? Thanks for your time!

[@Income_Architect]

1.When you say they roll their contracts, do you mean they sell 30 day, 60 day, and 90 day contracts. After 30 days, the 30 day contracts expire (hopefully out of the money) they then turn around and sell new 90 day contracts, with the original 60 day acting as their 30 day contracts, and the original 90 day contracts now acting as the 60 day contracts? They can roll the future contacts at anytime to any length of time and yes we hope that the role is from a lower VIX to higher VIX as that would be the premium. 2. You talk about a rolling spread. It seems like the premium is higher for the longer dated contracts than the shorter dated ones. But it is not clear how you calculate the spread they make off of rolling the contracts. I do not calculate anything I am a little confused to the comment. I think you are referring to the VIX central. vixcentral.com/ This is not my website. But I is it simple math one number subtracted as it’s just the percentage change. 3. Speaking of the rolling yield, what does the 0.25 number represent? It was included in various examples you provided, including the one for the bond yields. 0.25 represents the 25% vix contracts. They have 0.2 to 0.3 Vix contracts. 0.25 being in the middle. 4. Would love to hear more about where they should park the 16, now 10% sidelined capital. You mentioned a mm fund. You also seem okay with them selling covered calls. Any other ideas? Not my job. I pay them 0.72 for them to figure it out. There are many different asset classes that would be able to generate a small income without sitting on the sidelines with no substation income to generate the yields. 5. You talked about the distributions dropping because they are making less on the bonds, etc. You also explained why( yield on short term treasuries are dropping). Since yields on longer term treasuries have been rising, what is stopping them from buying 10 yr treasuries for example? They wouldn’t have enough liquidity in the fund? Why the yields on short term treasuries are dropping. Sure the Federal Reserve is dropping the rates. The longer term yields on the 10yr are influenced by inflation expectations of the market.

[@joaom.4944]

Are you meeting with Neos ?

[@Income_Architect]

I have never reached out to them. Their funds are easy to understand.

[@LanceSoFast1]

SVOL. GARBAGE! No thanks. Covered call junk. I’ll stick with index funds and other fixed income instruments. Great coverage tho Brad. 😊

[@Income_Architect]

👍 thanks