Witching Day

By VeilNode -

The Day My Conviction in AI Covered Call ETFs Finally Cracked



This article is a personal record of the day my mental composure truly broke while investing in AI-sector covered call ETFs.

It might not qualify as a “huge loss” in absolute terms. But it was undeniably the moment when my entire attitude toward investing changed.

It Happened Between November 19 and November 22

Up until that point, I had been investing in AI-sector covered call ETFs for roughly two months.

My positions included AMDY, PLTY, TSLY, and NVDY.

At the time, I was working as a freelance contractor. During a short break between tasks, I opened my fintech app out of habit. That was when I noticed something felt off.

VIX: 19 → 26, and a Portfolio That Warped Too Fast

The VIX index surged from 19 to 26 in a very short period of time. Simultaneously, most sectors—including AI—experienced sharp declines, many exceeding 20%.

My own portfolio dropped by roughly 10% in a narrow window. What stood out wasn’t just the magnitude of the loss, but the speed and simultaneity of it all.

There was no time to process. No meaningful opportunity to respond. Only one question remained:

“What exactly is happening right now?”

Why That Day Felt Especially Terrifying

Ironically, far larger losses were occurring elsewhere. Retail investors managing much bigger portfolios were suffering more severe drawdowns.

Because of that, it felt almost inappropriate to say, “I suffered a large loss.”

But investing is not experienced through absolute numbers alone. That day marked the first time I truly understood how fragile the structure I thought I understood really was when exposed to genuine market stress.

Why This Happened

Only after some time passed was I able to analyze the situation calmly. The issue was not a flaw in covered call ETFs themselves, but the collision of volatility and options mechanics.

Several factors overlapped within an unusually short timeframe:

  • Options expiration (witching day)
  • A sharp volatility spike
  • Heavy concentration in the AI sector
  • A sudden collective shift toward risk-off behavior

When these forces aligned, the structural weaknesses of the covered call strategy surfaced far faster than its usual advantages.




Why the Timing Was Especially Dangerous

Looking back, the shock wasn’t random. It was structural.

1. Options Expiration Combined With a Volatility Spike

Witching Day involves the simultaneous expiration of index options, equity options, and futures contracts. During these periods, market participants aggressively unwind and reposition risk.

When the VIX jumped from 19 to 26, option premiums exploded. Covered call strategies revealed their upside limitations long before their defensive qualities could matter.

2. Sector Concentration With a Single Strategy

Although my assets were diversified by ticker, they were unified by strategy. AMDY, PLTY, TSLY, and NVDY respond to volatility in remarkably similar ways.

When the AI sector shook, all positions moved together. That was why the distortion felt so sudden and severe.

3. The Illusion of “Dividends Will Protect Me”

Covered call ETFs often create a comforting belief: “At least the dividends will cushion the downside.”

That belief collapses during volatility-driven events. Price declines move far faster than distributions can compensate. That day, dividends provided psychological comfort—but not protection.

What I Changed Afterward

The more important question was no longer “Why was I wrong?” but “How should the portfolio have been structured instead?”

  • Covered calls now represent only a portion of my portfolio
  • I diversify strategies, not just tickers
  • I reduce exposure ahead of known risk events
  • I ask one question before entering any position

“Under what conditions does this product stop working in my favor?”

Closing Thoughts

Those days in November were not just a paper loss. They forced a complete re-evaluation of my approach.

Covered call ETFs remain useful tools. But since that experience, I no longer treat them lightly— or mistake familiarity for understanding.



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