October 15, 2025 • 17 mins
In this episode of Lead-Lag Live, I sit down with Si Katara, Founder and CEO of Tap Alpha, to explore how zero-day options are reshaping income investing for everyday investors.
From engineering background to ETF innovation, Katara shares how Tap Alpha’s TSPY ETF delivers daily option overlays on the S&P 500 — capturing upside while generating consistent, tax-efficient income in any market environment.
In this episode:
– Why traditional income products no longer work for investors today
– How zero-day options can mitigate risk and boost returns
– The math behind daily vs. monthly covered call strategies
– Why ETFs solve tax inefficiencies in options-based income
– How Tap Alpha is bridging Wall Street strategies for Main Street investors
Lead-Lag Live brings you inside conversations with the financial thinkers who shape markets. Subscribe for interviews that go deeper than the noise.
#LeadLagLive #TapAlpha #ETFs #OptionsInvesting #ZeroDTE #Markets
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_01 (00:00):
So if you took a 30-day option strategy, which is
relatively standard, at a staticrisk level, 25 delta calls that
you're selling over 30 days, andyou get X dollars in premium.
If you did the same thing, 25Delta calls, but you just traded
it every day for the 22 tradingdays in between and added it up,
you would get four to four and ahalf times the option premium
(00:22):
potential versus a 30-daystrategy.
SPEAKER_00 (00:49):
A clear sign that investors are hedging their
bets.
In this kind of market,investors want growth but can't
ignore income or volatility.
That's where Tap Alpha comes in.
Their flagship TSPY ETF puts adaily covered call overlay on
SPY, aiming to capture upsidewhile generating consistent
(01:11):
income.
It's a rethink of how coreequity exposure can work.
And it's led by my guest today,Cy Katara, founder and CEO of
Tap Alpha.
Cy, it's great to have you here.
SPEAKER_01 (01:23):
Melanie, great to be with you.
Thanks so much for having me.
SPEAKER_00 (01:25):
So let's sort of start at the beginning.
What led you to launch Tap Alphain the first place?
And what problem in the marketwere you trying to solve?
SPEAKER_01 (01:34):
I think the interesting thing for me was you
see powerful investingstrategies available to Wall
Street folks and high net worthindividuals, but the power of
those historically hasn't beenunlocked for everyday investors
and advisors.
And Tap Alpha really set out totry and change that.
The whole origin of actuallywhere the company came from, I
(01:55):
didn't come from a financebackground.
I was a computer engineer bytrade, so kind of a programmer,
uh, ended up going to work inSilicon Valley and then started
my very first tech startup in2005.
Built it, ran it for 17 years,but then I sort of blinked my
eyes and half my career wasbehind me.
And I realized if I wanted to doanything else with my life, I
(02:15):
had to make a change at thattime.
But the challenge was this wasOctober of 2022 and markets were
way down.
I'd always been an SP 500 buyand hold investor, and I didn't
want to sell equities to makeends meet.
So I remembered a strategy mydad had taught me, he was an
engineer turned advisor, and hetaught me about covered calls.
But the novel thing that justcame out that same quarter was
(02:38):
short-dated covered calls.
They call them zero DTE.
They're basically options thatjust expire every day.
And as an engineer, it kind ofhit me.
I was like, well, that makes alot of sense for precision and
risk management.
If you can actually have dailygranularity, you can maybe
mitigate risk versus longerdated stuff.
So I tried it and I didn't knowif it was going to amount to
anything.
(02:59):
But fast forward two months andjust the option premiums on top
of my spy shares covered thelion's share of our family's
mortgage when I wastransitioning to the next
opportunity.
And that for us was a hugefinancial relief.
Um the hard part, it just took alot of time and it took some
expertise.
And I thought to myself, man, ifit's helping our family like
(03:21):
this, how can we help otherfamilies like ours?
And that's what took us down theroad of actually figuring out
ways to get it to market.
We learned about ETFs, we builtsome technology underneath it,
we put it together, that plustransparency in education, and
all of a sudden we have a realopportunity to do things a
little bit differently to helpfamilies get growth plus income
in a transparent and consistentway.
(03:42):
And that's what actually endedup going into T-SPY.
SPEAKER_00 (03:45):
That's a fantastic story.
I want to uh uh lead on a littlebit more into that.
Uh investors are already a lotare or investors already lean on
traditional income products, butthey you've argued that they're
falling short.
What exactly is missing inthough in those other products,
and how does TAP alpha addressuh the gap?
SPEAKER_01 (04:04):
There's some key challenges with traditional
income sources.
Number one, bond yields, yeah,interest rates have been high,
but they're coming down.
You're seeing reductions happen.
So how do you replace thatincome?
Uh tax drag, if you don't havetax-sufficient income, you know,
it's not what you earn, it'swhat you keep.
That's what matters.
And ultimately, there's always atrade-off, right?
(04:26):
Especially with covered calls.
You can get income today, butmany times you're capping growth
for tomorrow.
And that's the trade-off.
And we wanted to solve for thosekey challenges.
Um, so what's zero-dated, we'veactually solved significantly um
the trade-off.
You can keep up with theunderlying index and generate
consistent income in a prettybalanced way.
(04:46):
And that was one of the thingsthat we saw in the market that
didn't really exist before wewere able to launch TSP and our
second fund T DAT.
Since then, we've proven themodel where you can generate
tax-efficient uh double-digitincome and track the underlying
securities depending on marketconditions in a pretty
consistent way.
Those are the key problems wewanted to solve.
(05:08):
And then you think aboutvolatility.
2025 has been a remarkable yearfor the ups and the downs, and
we've been on an amazing bullrun lately.
But if you think back to April,the VIX was above 30 for two
weeks, and then on April 9th, itshot above 60.
So, are you using tools that cango out and harvest that
(05:29):
volatility and translate it intoincome?
That's one of the things thatoptions can do if you end up
using them in an intelligentway.
And that's what we put togetherin the ETFs that we've launched
to market.
SPEAKER_00 (05:40):
More deeply into that again.
When it comes to core equityexposure, uh the SP 500 or
NASDAQ 100, why do you think itmakes sense to rethink the
structure instead of justlayering on additional risk with
more products?
SPEAKER_01 (05:53):
It's really interesting.
If you think about, you know, inmy case, like SP 500 was my
whole portfolio essentially,just buy and hold, and it did
well for us if you have a longtime horizon.
But thinking about enhanced coreallocations, you talk about, you
know, passive investing has beenpopular for a while.
And that popularity is goingdown in in sort of lieu of
(06:14):
active ETF management.
But what if you could take apassive core and add an active
uh options-based strategy on topwhere you get that balance best
of both worlds?
That's what we wanted to puttogether because in every
portfolio, you're gonna seeexposure to the SP 500.
In many uh portfolios, you'regonna see exposure to the Nasdaq
(06:35):
100.
But the question is, are youmaximizing the potential of what
you have?
And that was actually, you know,it's it's a bit on the nose, but
that's actually why we need thecompany Tap Alpha.
Tap into the potential of whatyou already have in order to get
more from it.
And that was the idea of addingan income component to the
underlying SP 500 exposure.
SPEAKER_00 (06:56):
Yeah, so as you as you've mentioned, Say your fund
takes a daily approach to theoptions overlay compared to
monthly setups.
We see some from some funds likea JEP, IRS PYI.
Why specifically daily, and whatdoes that change in terms of
outcomes?
SPEAKER_01 (07:10):
It's actually was remarkable.
And when we were doing theresearch and actually doing this
to put the product together, wedid the comparisons and there
were three huge reasons whydailies made sense for what we
were trying to accomplish withthe balance of broken income.
The first thing was optionpremium potential.
So if you took a 30-day optionstrategy, which is relatively
standard, at a static risklevel, 25 delta calls that
(07:34):
you're selling over 30 days, andyou get X dollars in premium.
If you did the same thing, 25Delta calls, but you just traded
it every day for the 22 tradingdays in between and added it up,
you would get four to four and ahalf times the option premium
potential versus a 30-daystrategy.
That alone was a huge reason whywe decided to go with zero day,
(07:58):
just because the risk-adjustedreturns of the option piece was
significantly amplified.
Second thing was overnight risk.
We're true zero DTE, meaning ouroption position opens in the
morning and it's done by the endof the day in most cases.
So, guess what you avoid?
You avoid overnight risk whereearnings calls happen after
(08:21):
hours, or macro news happensbefore market open.
And those are big swings, whichyou don't want to guess with
your option position where toput it, but you don't have to.
If you can avoid it, wait alittle bit until the market
digests it, and then you canmitigate risk in a much more
effective way.
And then the third thing, whichI just found as an engineer,
made a lot of sense, was you get22 at bats, where you can reset
(08:43):
your strike price every dayversus being stuck.
And the the analogy that I useis if you're flying from New
York to LA and you get one shotto point your plane at LAX's
airport, you take off and a gustof wind comes, or there's a
thunderstorm and it blows youoff course, there's no
opportunity to readjust yourcourse and actually land where
(09:05):
you intended to.
But if you can actually adjustyour course 22 times based on
those events that happen,there's a much higher
probability you're gonna landwhere you intended.
And that's the power of truezero DTE option strategies.
And that's why we're using thisoverlay in many, many
environments now.
SPEAKER_00 (09:22):
You've done a great job of explaining this.
I want to pivot just a littlebit to talk about taxes.
Uh taxes are always top of mindfor advisors and their clients.
How do you think about taxefficiency when you design
strategies and why does itmatter so much?
SPEAKER_01 (09:35):
It's incredibly important, especially if you're
using it in unqualifiedaccounts.
So, like I said earlier, it'snot what you earn, it's what you
keep.
Um, when I did this stuff in myindividual brokerage account, I
got crushed with ordinaryincome.
There's two components of value,right?
There's the option premiums andthen the capital growth of the
underlying security.
(09:56):
Both settings, I actually had topay ordinary income.
So options premiums that Icollected.
And then if I um sold some spyshares, that spy sale, even if I
held the spy for a longer amountof time, would be considered
ordinary income because of thisthing called straddle rules.
But guess what?
You put that same strategyinside an ETF vehicle.
(10:19):
ETFs are phenomenally taxefficient.
And so those two things actuallyget much better from a tax
efficiency standpoint.
So the option premium, now thatyou're at scale, you can use a
bigger tool like SPX options.
Those are what they call 1256contracts, which means they're
taxed at potentially 60%long-term cap gain, 40%
(10:42):
short-term.
So that's a nice advantage.
But the real game changer comesin the underlying shares.
So in uh Straddle rules, whathappens is when you when you
take a uh cover-call position,the underlying equity, the
capital gains clock pauses.
So if you buy SPY and you dothis every day and then you sell
(11:03):
it even 18 months later, thegrowth you have to pay
short-term cap gain on.
That hurts.
But if you do it in an ETF,because we don't realize the
gain within the ETF, and ETFshave this magic thing called
in-kind redeems.
If you sell a share of TSPY 18months later, those spy shares
(11:26):
that correspond to it go back tothe bank in kind, and all the uh
investor has to pay is deferredlong-term capital gains on the
nav growth of the ETF.
So ETF solve a tax problem thatis uh rampant for options-based
strategies.
(11:46):
That's why it's the perfectvehicle to execute these types
of things so that you canactually get much more
tax-efficient outcomes than ifyou did this on your own.
SPEAKER_00 (11:53):
It's great.
And and Saya, why do you believenow, as well as well as it being
Q4 and at the end of 2025, butwhy do you believe now is the
right moment for this kind ofstrategy for investors and for
advisors?
What about today's marketenvironment makes uh the top
alpha approach especiallyrelevant?
SPEAKER_01 (12:10):
There's two things.
One, interest rates are goingdown.
So how do you replace income?
And volatility in 2025 comparedto 2024 and before is going up.
That's the perfect environmentto add an options capability
because you harvest thatvolatility and you're replacing
income that's no longerachievable using uh traditional
(12:32):
debt-based instruments.
Those two things, plus the factthat zero DTE now exists, and
this is, you know, zero DTE onthe buy side, it gets kind of a
tough wrap in the retail marketsbecause people can use it to
speculate on the buy side.
But the flip side is if you'reusing it to mitigate risk and
you're selling them, there'slots of advantages.
(12:53):
So you put all that together andyou manage it within the package
of an ETF, that creates a reallypowerful solution that you can
use in portfolios in manydifferent ways.
SPEAKER_00 (13:03):
And so TSPY has already surpassed 100 million in
AUM just over a year afterlaunch.
Why do you think it's resonatingwith advisors and how are they
using it in their portfolios?
SPEAKER_01 (13:14):
I appreciate it.
Um, I think advisors areincreasingly looking for ways to
make core equity exposure workharder.
Uh, and that's where T-SPY fitsin.
Dollar for dollar, you get thesame exposure to the SP 500 for
T-SPY or the NASDAQ 100 forTDAC, but you're adding this
option strategy on top that, andthat execution really adds
(13:35):
another, you know, severalcharacteristics that advisors
seem to like.
The first one is um we're ableto distribute about 14%
potentially tax-efficient incomein addition to still having
exposure to the SP 500.
In a lot of cases, the trade-offfor one or the other, but in
this case, you get a chance tohave exposure to both.
The second thing is the optionsincome, it actually acts as an
(13:58):
offset.
So it takes the correlationdown, the beta, down to about a
0.88.
And we're still gettingmarket-like returns.
So that's sort of always beensomething that advisors
communicate to us is like a holygrail.
Get the market-like return, butreduce the beta and the
correlation a bit, uh, you getbetter risk-adjusted returns.
That's what people are goingfor.
(14:18):
And that's what we've been ableto achieve with TSP as the first
product and TDAC as a second.
So putting all that together ina tax-efficient package like an
ETF, it seems to be resonatingwhere people are looking at,
I've got core equity exposurenow.
Why don't I just complement oreven wholesale replace it?
Because I'm going to get thesame core equity exposure.
(14:40):
But then now I'm adding thisincome and options capability on
top.
So the bad analogy that we useis uh you've got a vanilla cone,
that's like the SP 500, but nowyou're adding sprinkles with the
options income capability ontop.
And that actually has beenresonating really well as a
compelling package that advisorscan use in multiple places in
their portfolios.
SPEAKER_00 (15:01):
And lastly, before we wrap up, for anyone watching
who wants to learn more aboutTap Alpha, see the funds in
action or connect with youdirectly, where's the best place
for them to go?
SPEAKER_01 (15:10):
Take a look at the funds, tapalphafunds.com.
Um, all the fund descriptionsare there.
And then uh you can reach out tous through the website.
We love interactions fromadvisors, from individual
investors, because what'sinteresting is we launched TSP
and we run it for about a yearnow, but we've proven out what
we intended to accomplish.
And now this method and thetools that we built to run it
(15:33):
can be applied to many, manythings.
And so we love to hear from themarket to see where there might
be use cases for um areas orsecurities that you really have
conviction in.
We're all ears to figure out howwe can best serve uh the market
needs.
SPEAKER_00 (15:46):
That's great.
So make sure to head over to thewebsite that Sai mentioned.
And thanks so much again forjoining me, Sai.
And uh thanks to everyone forwatching.
Be sure to like, share, andsubscribe for more episodes of
Lead Light Live.
So if you took a 30-day option strategy, which is
relatively standard, at a staticrisk level, 25 delta calls that
you're selling over 30 days, andyou get X dollars in premium.
If you did the same thing, 25Delta calls, but you just traded
it every day for the 22 tradingdays in between and added it up,
you would get four to four and ahalf times the option premium
(00:22):
potential versus a 30-daystrategy.
SPEAKER_00 (00:49):
A clear sign that investors are hedging their
bets.
In this kind of market,investors want growth but can't
ignore income or volatility.
That's where Tap Alpha comes in.
Their flagship TSPY ETF puts adaily covered call overlay on
SPY, aiming to capture upsidewhile generating consistent
(01:11):
income.
It's a rethink of how coreequity exposure can work.
And it's led by my guest today,Cy Katara, founder and CEO of
Tap Alpha.
Cy, it's great to have you here.
SPEAKER_01 (01:23):
Melanie, great to be with you.
Thanks so much for having me.
SPEAKER_00 (01:25):
So let's sort of start at the beginning.
What led you to launch Tap Alphain the first place?
And what problem in the marketwere you trying to solve?
SPEAKER_01 (01:34):
I think the interesting thing for me was you
see powerful investingstrategies available to Wall
Street folks and high net worthindividuals, but the power of
those historically hasn't beenunlocked for everyday investors
and advisors.
And Tap Alpha really set out totry and change that.
The whole origin of actuallywhere the company came from, I
(01:55):
didn't come from a financebackground.
I was a computer engineer bytrade, so kind of a programmer,
uh, ended up going to work inSilicon Valley and then started
my very first tech startup in2005.
Built it, ran it for 17 years,but then I sort of blinked my
eyes and half my career wasbehind me.
And I realized if I wanted to doanything else with my life, I
(02:15):
had to make a change at thattime.
But the challenge was this wasOctober of 2022 and markets were
way down.
I'd always been an SP 500 buyand hold investor, and I didn't
want to sell equities to makeends meet.
So I remembered a strategy mydad had taught me, he was an
engineer turned advisor, and hetaught me about covered calls.
But the novel thing that justcame out that same quarter was
(02:38):
short-dated covered calls.
They call them zero DTE.
They're basically options thatjust expire every day.
And as an engineer, it kind ofhit me.
I was like, well, that makes alot of sense for precision and
risk management.
If you can actually have dailygranularity, you can maybe
mitigate risk versus longerdated stuff.
So I tried it and I didn't knowif it was going to amount to
anything.
(02:59):
But fast forward two months andjust the option premiums on top
of my spy shares covered thelion's share of our family's
mortgage when I wastransitioning to the next
opportunity.
And that for us was a hugefinancial relief.
Um the hard part, it just took alot of time and it took some
expertise.
And I thought to myself, man, ifit's helping our family like
(03:21):
this, how can we help otherfamilies like ours?
And that's what took us down theroad of actually figuring out
ways to get it to market.
We learned about ETFs, we builtsome technology underneath it,
we put it together, that plustransparency in education, and
all of a sudden we have a realopportunity to do things a
little bit differently to helpfamilies get growth plus income
in a transparent and consistentway.
(03:42):
And that's what actually endedup going into T-SPY.
SPEAKER_00 (03:45):
That's a fantastic story.
I want to uh uh lead on a littlebit more into that.
Uh investors are already a lotare or investors already lean on
traditional income products, butthey you've argued that they're
falling short.
What exactly is missing inthough in those other products,
and how does TAP alpha addressuh the gap?
SPEAKER_01 (04:04):
There's some key challenges with traditional
income sources.
Number one, bond yields, yeah,interest rates have been high,
but they're coming down.
You're seeing reductions happen.
So how do you replace thatincome?
Uh tax drag, if you don't havetax-sufficient income, you know,
it's not what you earn, it'swhat you keep.
That's what matters.
And ultimately, there's always atrade-off, right?
(04:26):
Especially with covered calls.
You can get income today, butmany times you're capping growth
for tomorrow.
And that's the trade-off.
And we wanted to solve for thosekey challenges.
Um, so what's zero-dated, we'veactually solved significantly um
the trade-off.
You can keep up with theunderlying index and generate
consistent income in a prettybalanced way.
(04:46):
And that was one of the thingsthat we saw in the market that
didn't really exist before wewere able to launch TSP and our
second fund T DAT.
Since then, we've proven themodel where you can generate
tax-efficient uh double-digitincome and track the underlying
securities depending on marketconditions in a pretty
consistent way.
Those are the key problems wewanted to solve.
(05:08):
And then you think aboutvolatility.
2025 has been a remarkable yearfor the ups and the downs, and
we've been on an amazing bullrun lately.
But if you think back to April,the VIX was above 30 for two
weeks, and then on April 9th, itshot above 60.
So, are you using tools that cango out and harvest that
(05:29):
volatility and translate it intoincome?
That's one of the things thatoptions can do if you end up
using them in an intelligentway.
And that's what we put togetherin the ETFs that we've launched
to market.
SPEAKER_00 (05:40):
More deeply into that again.
When it comes to core equityexposure, uh the SP 500 or
NASDAQ 100, why do you think itmakes sense to rethink the
structure instead of justlayering on additional risk with
more products?
SPEAKER_01 (05:53):
It's really interesting.
If you think about, you know, inmy case, like SP 500 was my
whole portfolio essentially,just buy and hold, and it did
well for us if you have a longtime horizon.
But thinking about enhanced coreallocations, you talk about, you
know, passive investing has beenpopular for a while.
And that popularity is goingdown in in sort of lieu of
(06:14):
active ETF management.
But what if you could take apassive core and add an active
uh options-based strategy on topwhere you get that balance best
of both worlds?
That's what we wanted to puttogether because in every
portfolio, you're gonna seeexposure to the SP 500.
In many uh portfolios, you'regonna see exposure to the Nasdaq
(06:35):
100.
But the question is, are youmaximizing the potential of what
you have?
And that was actually, you know,it's it's a bit on the nose, but
that's actually why we need thecompany Tap Alpha.
Tap into the potential of whatyou already have in order to get
more from it.
And that was the idea of addingan income component to the
underlying SP 500 exposure.
SPEAKER_00 (06:56):
Yeah, so as you as you've mentioned, Say your fund
takes a daily approach to theoptions overlay compared to
monthly setups.
We see some from some funds likea JEP, IRS PYI.
Why specifically daily, and whatdoes that change in terms of
outcomes?
SPEAKER_01 (07:10):
It's actually was remarkable.
And when we were doing theresearch and actually doing this
to put the product together, wedid the comparisons and there
were three huge reasons whydailies made sense for what we
were trying to accomplish withthe balance of broken income.
The first thing was optionpremium potential.
So if you took a 30-day optionstrategy, which is relatively
standard, at a static risklevel, 25 delta calls that
(07:34):
you're selling over 30 days, andyou get X dollars in premium.
If you did the same thing, 25Delta calls, but you just traded
it every day for the 22 tradingdays in between and added it up,
you would get four to four and ahalf times the option premium
potential versus a 30-daystrategy.
That alone was a huge reason whywe decided to go with zero day,
(07:58):
just because the risk-adjustedreturns of the option piece was
significantly amplified.
Second thing was overnight risk.
We're true zero DTE, meaning ouroption position opens in the
morning and it's done by the endof the day in most cases.
So, guess what you avoid?
You avoid overnight risk whereearnings calls happen after
(08:21):
hours, or macro news happensbefore market open.
And those are big swings, whichyou don't want to guess with
your option position where toput it, but you don't have to.
If you can avoid it, wait alittle bit until the market
digests it, and then you canmitigate risk in a much more
effective way.
And then the third thing, whichI just found as an engineer,
made a lot of sense, was you get22 at bats, where you can reset
(08:43):
your strike price every dayversus being stuck.
And the the analogy that I useis if you're flying from New
York to LA and you get one shotto point your plane at LAX's
airport, you take off and a gustof wind comes, or there's a
thunderstorm and it blows youoff course, there's no
opportunity to readjust yourcourse and actually land where
(09:05):
you intended to.
But if you can actually adjustyour course 22 times based on
those events that happen,there's a much higher
probability you're gonna landwhere you intended.
And that's the power of truezero DTE option strategies.
And that's why we're using thisoverlay in many, many
environments now.
SPEAKER_00 (09:22):
You've done a great job of explaining this.
I want to pivot just a littlebit to talk about taxes.
Uh taxes are always top of mindfor advisors and their clients.
How do you think about taxefficiency when you design
strategies and why does itmatter so much?
SPEAKER_01 (09:35):
It's incredibly important, especially if you're
using it in unqualifiedaccounts.
So, like I said earlier, it'snot what you earn, it's what you
keep.
Um, when I did this stuff in myindividual brokerage account, I
got crushed with ordinaryincome.
There's two components of value,right?
There's the option premiums andthen the capital growth of the
underlying security.
(09:56):
Both settings, I actually had topay ordinary income.
So options premiums that Icollected.
And then if I um sold some spyshares, that spy sale, even if I
held the spy for a longer amountof time, would be considered
ordinary income because of thisthing called straddle rules.
But guess what?
You put that same strategyinside an ETF vehicle.
(10:19):
ETFs are phenomenally taxefficient.
And so those two things actuallyget much better from a tax
efficiency standpoint.
So the option premium, now thatyou're at scale, you can use a
bigger tool like SPX options.
Those are what they call 1256contracts, which means they're
taxed at potentially 60%long-term cap gain, 40%
(10:42):
short-term.
So that's a nice advantage.
But the real game changer comesin the underlying shares.
So in uh Straddle rules, whathappens is when you when you
take a uh cover-call position,the underlying equity, the
capital gains clock pauses.
So if you buy SPY and you dothis every day and then you sell
(11:03):
it even 18 months later, thegrowth you have to pay
short-term cap gain on.
That hurts.
But if you do it in an ETF,because we don't realize the
gain within the ETF, and ETFshave this magic thing called
in-kind redeems.
If you sell a share of TSPY 18months later, those spy shares
(11:26):
that correspond to it go back tothe bank in kind, and all the uh
investor has to pay is deferredlong-term capital gains on the
nav growth of the ETF.
So ETF solve a tax problem thatis uh rampant for options-based
strategies.
(11:46):
That's why it's the perfectvehicle to execute these types
of things so that you canactually get much more
tax-efficient outcomes than ifyou did this on your own.
SPEAKER_00 (11:53):
It's great.
And and Saya, why do you believenow, as well as well as it being
Q4 and at the end of 2025, butwhy do you believe now is the
right moment for this kind ofstrategy for investors and for
advisors?
What about today's marketenvironment makes uh the top
alpha approach especiallyrelevant?
SPEAKER_01 (12:10):
There's two things.
One, interest rates are goingdown.
So how do you replace income?
And volatility in 2025 comparedto 2024 and before is going up.
That's the perfect environmentto add an options capability
because you harvest thatvolatility and you're replacing
income that's no longerachievable using uh traditional
(12:32):
debt-based instruments.
Those two things, plus the factthat zero DTE now exists, and
this is, you know, zero DTE onthe buy side, it gets kind of a
tough wrap in the retail marketsbecause people can use it to
speculate on the buy side.
But the flip side is if you'reusing it to mitigate risk and
you're selling them, there'slots of advantages.
(12:53):
So you put all that together andyou manage it within the package
of an ETF, that creates a reallypowerful solution that you can
use in portfolios in manydifferent ways.
SPEAKER_00 (13:03):
And so TSPY has already surpassed 100 million in
AUM just over a year afterlaunch.
Why do you think it's resonatingwith advisors and how are they
using it in their portfolios?
SPEAKER_01 (13:14):
I appreciate it.
Um, I think advisors areincreasingly looking for ways to
make core equity exposure workharder.
Uh, and that's where T-SPY fitsin.
Dollar for dollar, you get thesame exposure to the SP 500 for
T-SPY or the NASDAQ 100 forTDAC, but you're adding this
option strategy on top that, andthat execution really adds
(13:35):
another, you know, severalcharacteristics that advisors
seem to like.
The first one is um we're ableto distribute about 14%
potentially tax-efficient incomein addition to still having
exposure to the SP 500.
In a lot of cases, the trade-offfor one or the other, but in
this case, you get a chance tohave exposure to both.
The second thing is the optionsincome, it actually acts as an
(13:58):
offset.
So it takes the correlationdown, the beta, down to about a
0.88.
And we're still gettingmarket-like returns.
So that's sort of always beensomething that advisors
communicate to us is like a holygrail.
Get the market-like return, butreduce the beta and the
correlation a bit, uh, you getbetter risk-adjusted returns.
That's what people are goingfor.
(14:18):
And that's what we've been ableto achieve with TSP as the first
product and TDAC as a second.
So putting all that together ina tax-efficient package like an
ETF, it seems to be resonatingwhere people are looking at,
I've got core equity exposurenow.
Why don't I just complement oreven wholesale replace it?
Because I'm going to get thesame core equity exposure.
(14:40):
But then now I'm adding thisincome and options capability on
top.
So the bad analogy that we useis uh you've got a vanilla cone,
that's like the SP 500, but nowyou're adding sprinkles with the
options income capability ontop.
And that actually has beenresonating really well as a
compelling package that advisorscan use in multiple places in
their portfolios.
SPEAKER_00 (15:01):
And lastly, before we wrap up, for anyone watching
who wants to learn more aboutTap Alpha, see the funds in
action or connect with youdirectly, where's the best place
for them to go?
SPEAKER_01 (15:10):
Take a look at the funds, tapalphafunds.com.
Um, all the fund descriptionsare there.
And then uh you can reach out tous through the website.
We love interactions fromadvisors, from individual
investors, because what'sinteresting is we launched TSP
and we run it for about a yearnow, but we've proven out what
we intended to accomplish.
And now this method and thetools that we built to run it
(15:33):
can be applied to many, manythings.
And so we love to hear from themarket to see where there might
be use cases for um areas orsecurities that you really have
conviction in.
We're all ears to figure out howwe can best serve uh the market
needs.
SPEAKER_00 (15:46):
That's great.
So make sure to head over to thewebsite that Sai mentioned.
And thanks so much again forjoining me, Sai.
And uh thanks to everyone forwatching.
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