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 May 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 May roll period. They outline their influence over the option pricing environment and help substantiate changing investor sentiments as characterized by specific market indicators.

Covered Call Report – May 2024 Key Takeaways

• Extending from April 19th to May 17th, the May roll period for the Global X Covered Call suite of products was one characterized by a broad market recovery. At its onset, the S&P 500 and Nasdaq 100 bounced off their two- and three-month troughs, respectively, and proceeded to appreciate in the high single-digit percentage vicinities.¹ Investor confidence was spurred by tapering U.S. inflation data and solid first-quarter corporate earnings. In fact, amongst the some 93% of all S&P 500 constituents to have reported by May 17th, roughly 78% of them announced a positive earnings surprise.²
• Increasing optimism surrounding a potential Federal Reserve rate cut and U.S market price appreciation in the second half of 2024 led volatility, as denoted by all four of the major domestic equity indices’ primary volatility gauges, to recede to levels rarely seen in the post-pandemic environment.³ The Cboe Volatility Index (VIX) and the Nasdaq 100 Volatility Index (VXN), in particular, established lows of 11.91 and 15.77, respectively, on May 17th. This signal of confidence and bullish sentiment put pressure on the premium values that were attained by the covered call suite of funds.
• The Cboe Russell 2000 Volatility Index indeed represents one of the abovementioned temperature gauges to have tested post-pandemic lows during the roll period. However, the Global X Russell 2000 Covered Call ETF (RYLD) still retrieved a premium strong enough to allow it to distribute up to its cap. The undertaking helped illustrate how monetizing even depleted volatility within the small-cap space can promote the potential for higher returns within a portfolio. RYLD has now distributed up to its cap in each of the first five months of 2024.