Monthly Covered Call Commentary December 2024

The Global X Research Team is pleased to announce the release of its Monthly Covered Call Report, featuring the premium and distribution values attained by its roster of covered call funds in December of 2024. The key takeaways below, as well as those highlighted within the report, recap some of the most pivotal undertakings to have taken place across the markets during the December roll period. They outline their influence over the option pricing environment and help substantiate changing investor sentiments as characterized by specific market indicators.

View the full report.

Covered Call Report – December 2024 Key Takeaways
 

• Digesting economic data surrounding employment and inflation, as well as the potential implications of a new political regime that will be entering the White House in late January, the December roll period for the Global X Covered Call Suite, which stretched from November 15th to December 20th, began with most of the major domestic equity indices on an upward trajectory. The Nasdaq 100, in particular, was up 8.45% on a total return basis through December 16th.¹ However, as the period came to a close, news surrounding the pace of interest rate cuts by the Federal Open Market Committee in 2025 caused the markets to reverse course. Ultimately, the S&P 500 and Nasdaq 100 remained up in the low single-digit percentage vicinity for the roll period, while the Dow Jones Industrial Average and Russell 2000 experienced negative returns.²

• The market drawdown that stretched from December 17th to December 19th was accompanied by the largest spike on the Cboe Volatility Index (VIX) since August 5th.³ It illustrated the level of uncertainty that investors were pricing in regarding the degree of monetary easing that they might expect in the year ahead. It also contributed to rising call option premium values, which were evident for the Global X Nasdaq 100 Covered Call ETF (QYLD) and the Global X S&P 500 Covered Call ETF (XYLD), which attracted their highest premiums since the March roll of 2023.

• Although the VIX was quick to contract moving into the January 2025 roll period, the Cboe VVIX Index, which seeks to explain volatility associated with the VIX, remained elevated relative to recent history when the VIX was trading at such levels.⁴ The relationship suggests that wider variability could be in store for the VIX in the near term. The environment may promote additional equity price sensitivity to economic data releases and major market events. This level of uncertainty also has the potential to drive option premium values, as investors may seek long positions using option contracts that are typically less expensive than their underlying investments.

1. Bloomberg L.P. Nasdaq 100 Index total returns from November 15th, 2024 to December 16th, 2024.

2. Bloomberg L.P. S&P 500, Nasdaq 100, Dow Jones Industrial Average, and Russell 2000 Total Returns from November 15th, 2024 to December 20th, 2024. Retrieved December 24th, 2024

3. Bloomberg L.P. Cboe Volatility Index from August 5th, 2024 to December 20th, 2024. Retrieved December 24th, 2024.

4. Bloomberg L.P. Cboe Volatility Index and Cboe VVIX Index from December 20th, 2021 to December 31st, 2024. Retrieved December 31st, 2024.

Our Ethereum Covered Call ETF is designed to offer exposure to the price return of ether ETPs while seeking to mitigate some of their volatility.

Our Ethereum Covered Call ETF is designed to offer exposure to the price return of ether ETPs while seeking to mitigate some of their volatility.

This month highlights semiconductors/quantum computing as one of the top trending themes and hydrogen as an out-of-favor-theme showing possible recovery.

This month highlights semiconductors/quantum computing as one of the top trending themes and hydrogen as an out-of-favor-theme showing possible recovery.