The Most Efficient Way To Invest in the MAG-7
The Roundhill Magnificent Seven ETF (MAGS) offers equal-weight exposure to the “Magnificent Seven” stocks
(1) What's the buzz?
The Roundhill Magnificent Seven ETF (MAGS) offers equal-weight exposure to the “Magnificent Seven” stocks – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla. MAGS is the first-ever ETF to track the Magnificent Seven.
MAGS offers pure exposure to the Magnificent Seven stocks. MAGS seeks to provide tax efficiency similar to a traditionally managed ETF.
MAGS is rebalanced to equal weight every quarter, ensuring consistent exposure to the Magnificent Seven stocks in a single ticker.
(2) So what?
MAGS, launched on April 11, 2023, has quickly amassed more than $800.00 million in assets under management (AUM).
Portfolio Structure: MAGS is an ETF that rebalances its portfolio quarterly to maintain equal weights in the Magnificent Seven companies. As of November 3, 2024, the weightings are NVIDIA Corp at 16.24%, Alphabet Inc-Class A at 14.76%, Amazon.com Inc at 14.23%, Meta Platforms Inc-Class A at 14.00%, Tesla Inc at 13.88%, Apple Inc at 13.72%, and Microsoft Corp at 13.20%.
Derivative Use: MAGS invests directly in these companies and uses swap agreements and forward contracts to gain additional exposure. The derivatives are generally not designed to produce leverage, although the ETF can invest in leveraged derivatives, which can amplify both gains and losses.
Swap Agreements: MAGS enters into swap agreements with major financial intermediaries for durations ranging from one day to over a year. These agreements involve exchanging returns based on predetermined investments or, in some cases, taking physical delivery of the underlying securities.
Forward Contracts: Forward contracts are used to purchase or sell underlying assets at a specified price on a future date. This helps mitigate risk against price fluctuations in volatile stocks and adds flexibility to the portfolio without the constraints of option contracts.
(3) Now what?
The Roundhill Magnificent Seven ETF (MAGS) does not directly facilitate a buy-write strategy or the sale of cash-covered puts.
However, an investor can sell options on the Roundhill Magnificent Seven ETF (MAGS) by utilizing various options.
Below is the Call option chain for the spring 2025 maturity:
Below is the Puts option chain for the spring 2025 maturity:
(4) And next?
The performance of the MAG-7 stocks has differed widely in 2024. The best-performing stock has been Nvidia, and the worst performer has been Tesla.
Nvidia is currently trading near its ATH.
Meta has been a stellar performer in 2024 but fell after issuing weaker-than-expected guidance in its latest earnings report.
Alphabet has lagged the other MAG-7 stocks for most of the year but reported better earnings than anticipated.
The same applies to Amazon.
Microsoft peaked in the summer of 2024. Since then, it has been the weakest MAG-7 stock.
Tesla is the only MAG-7 stock in the red in 2024. The shares swing wildly.
The difference between the best and the worst-performing MAG-7 stock has been tremendous in 2024.
