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Strategies & Market Trends : Young and Older Folk Portfolio -- Ignore unavailable to you. Want to Upgrade?

To: Charliebrown7211 who wrote (7863)	8/10/2024 3:26:29 PM
From: SeeksQuality	Respond to of 22049

I suspect that the futures are priced at only a small discount to the actual value of the dividends. Anything more would be a "market inefficiency" that would be quickly stomped out. Because they are buying the dividends ahead of time, they have less cash to invest in SPY itself. Thus the total returns approximate 85% of SPY. I suspect that buying the futures in advance helps them smooth the performance, so they don't find themselves short of cash on a distribution in case the dividends unexpectedly jump. Thus a sensible way to achieve their stated objective, even if it isn't all THAT meaningful from a broader investment standpoint.

To: Charliebrown7211 who wrote (7863)

8/10/2024 3:38:53 PM

From: jritz0

Respond to of 22049

" So QDPL's return would be the dividends received minus the price of the futures contract? Would this market inefficiency not eventually be recognized by the market as a whole and dry up?"

I don't think the video is 100% correct. All of QDPL's distribution won't come from the futures. The S&P500 currently yields 1.28%. When buying futures, the buyers must be compensated for the risk, there is a chance that the dividend could be cut like in 2008.

Here is a video of the head of Pacers funds and talks briefly about the derivative market. They no longer offer TRPL, the sister fund because of lack of AUM growth which is not a problem with QDPL.
ETF 360: Sean O'Hara with Pacer ETFs (youtube.com)


"I did a google search for the professor mentioned in the video and found numerous papers he has written and collaborated upon. One subject was valuing future dividends, so maybe that paper was the basis for QDPL. I tried to read it but was lost after the 2nd page..." How about a video of the presentation, I don't usually read books, I wait for the movies :) Dividend Strips: Prof. Jules H. van Binsbergen presents his research on Dividend Strips - YouTube