Can someone explain it a bit better? I am not quite sure why in addition to spx this fund buys options on Bookings? Also, where is the risk in this strategy, besides counter parties risk.
The Bookings options are explained in the Bloomberg article. They use offsetting bets so that one generates a large gain and the other generates a large loss (either way the stock moves). Then the gain is offloaded through an in-kind redemption (not a taxable event for an ETF) and the loss is kept on the books to offset any other taxable gains in the fund. I guess you could worry what happens if the stock doesn't move, but since they get to pick the timing, that seems unlikely to be an issue in practice.
I can think of at least a few risks that one would not have with T-bills besides counterparty risk. You have management risk: they have said what their strategy is and what they will do, but what if they don't? I would also ask who is on the other side of these trades and how big that market is or can be. Alpha Architect's own explainer implies that box spreads can also be used to borrow money and that this might be cheaper for the borrowers than margin loans, which makes some sense, but it seems like a pretty esoteric instrument to use for that. Most of their argument is an appeal to the efficiency of markets, which might be true until it isn't. Finally, there's regulatory risk. They think this works under the current rules, but a regulator might disagree with that. If someone does not like it a sufficient amount the rules could be changed, just like there's already an exception for "original issue discount" that makes zero-coupon bond income like Treasuries count as interest income, not capital gains, even though no interest payments are ever made.
I'm not in finance, though, I'm just some guy, so take all of the above with a grain of salt.
I can think of at least a few risks that one would not have with T-bills besides counterparty risk. You have management risk: they have said what their strategy is and what they will do, but what if they don't? I would also ask who is on the other side of these trades and how big that market is or can be. Alpha Architect's own explainer implies that box spreads can also be used to borrow money and that this might be cheaper for the borrowers than margin loans, which makes some sense, but it seems like a pretty esoteric instrument to use for that. Most of their argument is an appeal to the efficiency of markets, which might be true until it isn't. Finally, there's regulatory risk. They think this works under the current rules, but a regulator might disagree with that. If someone does not like it a sufficient amount the rules could be changed, just like there's already an exception for "original issue discount" that makes zero-coupon bond income like Treasuries count as interest income, not capital gains, even though no interest payments are ever made.
I'm not in finance, though, I'm just some guy, so take all of the above with a grain of salt.