What this ETF is trying to do

The PEERLESS OPTION INCOME WHEEL ETF (ticker: WEEL) is an exchange-traded fund designed to generate income. It is classified as an "option income" ETF, which means it uses specific strategies involving options to try and create cash for its investors.

What the numbers show

When looking at WEEL, it is important to understand the difference between price return and total return. The price return only tracks how much the share price itself has changed. The total return includes both the change in share price and any cash distributions paid out.

Based on the supplied data:

• Year-to-Date (YTD): The price return is approximately 3.84%, while the total return is much higher at approximately 9.50%.

• One-Year: The price return was approximately 0.63%, while the total return was approximately 14.28%.

The difference between these two numbers shows that a large part of the fund's performance comes from its distributions rather than just the rising share price.

Income and distribution explanation

WEEL provides a high level of cash distributions. The distribution yield is approximately 15.70%. This number represents the cash paid out relative to the current ETF price.

The fund usually pays distributions on a quarterly basis, though it has had 5 payouts in the last 12 months. The trailing distributions over the last year totaled $3.15 per share. While a high yield can provide significant cash, it is important to remember that a high distribution rate does not guarantee the investment will grow in value.

NAV erosion explanation

"NAV erosion" refers to a decline in the Net Asset Value (the actual value of the fund's underlying assets). The supplied data is sufficient to evaluate price erosion, but it does not include enough historical NAV-per-share data to confirm or rule out NAV erosion.

However, we can look at the erosion-risk score, which is 94. This is labeled as "Stable / sideways" with a "good" severity rating. There is no severe erosion-risk flag for this ETF.

Top Holdings

The following are the top holdings in the portfolio (note that this list is partial):

• Other Assets and Liabilities: 11.59%

• ARK Innovation ETF (ARKK): 7.17%

• First American Government Obligs X (FGXXX): 5.34%

• State Street® Utilities Sector SPDR® ETF (XLU): 4.74%

• iShares Expanded Tech-Software Sect ETF (IGV): 4.18%

• VanEck Gold Miners ETF (GDX): 4.09%

• Invesco QQQ Trust (QQQ): 3.89%

• iShares MSCI Emerging Markets ETF (EEM): 3.89%

• KraneShares CSI China Internet ETF (KWEB): 3.25%

• iShares US Home Construction ETF (ITB): 2.16%

Holdings can change over time.

Pros

• High distribution yield of approximately 15.70%.

• The total return is significantly higher than the price return, suggesting distributions add substantial value.

• The erosion-risk score is rated as "good."

Cons

• The share price has grown much more slowly than the total return.

• High-yield strategies can sometimes involve different risks regarding how much the share price moves.

Beginner takeaway

WEEL is an option-income ETF that focuses on providing high cash distributions. While the share price itself has remained relatively flat (showing a small one-year price return of 0.63%), the total return is much higher (14.28%) because of the cash paid out to investors. Always remember that a high distribution yield is not the same as total growth.