Understanding the ROUNDHILL S&P 500 TARGET 20 MANAGED DISTRIBUTION ETF (XPAY)

What this ETF is trying to do

The XPAY ETF is an investment fund that uses options to generate income. It is categorized as an "option income" ETF. This means it uses specific financial tools called options to try and create regular cash payments for investors.

What the numbers show

It is important to understand that "price return" and "total return" are two different things.

• Price Return: This measures only the change in the share price. For XPAY, the one-year price return was approximately -5.56%. The year-to-date (YTD) price return was approximately -3.22%. This means the share price itself has gone down over these periods.

• Total Return: This measures the overall performance, including the cash distributions paid out. The one-year total return was approximately 15.97%, and the YTD total return was approximately 12.84%.

To see how the price changed, we can look at an estimate. The current price is $52.17. An estimated price from roughly one year ago was approximately $55.24.

Income and distribution explanation

This ETF focuses on providing cash to investors. The distribution yield is approximately 21.00%. This number describes the cash distributions relative to the ETF's price. These payments usually happen monthly, with 12 payments made over the last year.

While a high yield provides cash income, it is important to remember that a high distribution yield does not mean the investor earned that same percentage as their total return. You must look at the "total return" figure to see the full picture of how the investment performed.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. StockValueFinder uses an "erosion-risk score" to measure this risk. XPAY has an erosion score of 75, which is labeled as "mild price erosion." This is a measurement of risk and does not necessarily mean the fund's value has collapsed.

Pros

• The ETF provides a high distribution yield, which can provide regular cash.

• The total return figures (which include distributions) have been positive for both the year-to-date and one-year periods, even though the share price fell.

Cons

• The share price has experienced a decline (negative price return) over the last year and year-to-date.

• The fund has a "mild" erosion-risk score.

Beginner takeaway

When looking at ETFs like XPAY, high yields can be misleading if you only look at the cash being paid out. An investor should always check both the price return (how the share price moves) and the total return (the price movement plus the cash received). This helps you understand if the cash payments are helping to make up for any drops in the share price.