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 August 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 August 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 – August 2024 Key Takeaways

• The proverbial fear indexes that seek to characterize U.S. market trading behavior for the four major domestic indices had been trending upward for the better part of the last three roll periods for the Global X Covered Call product suite, and during the August roll stretching from July 19^th to August 16^th, the Cboe Volatility Index (VIX), the Cboe Nasdaq 100 Volatility Index (VXN), the Cboe Russell 2000 Volatility Index (RVX), and the Cboe Dow Jones Industrial Average Volatility Index (VXD) all expressed their highest peaks in over a year.¹ The happening was influenced by a series of economic data points, including a higher-than-expected domestic unemployment rate, which was made available to the public on August 2^nd.² Thereafter, a decision by the Bank of Japan to briefly raise its key interest rate some 25 basis points led to a chain of events that would see investors unwind their yen-denominated carry trades and send U.S. markets into a tailspin on August 8th.³
• From the S&P 500’s nadir 5,162 value on August 8th to the end of the roll period on August 16^th, the index rose about 7.6% while the Cboe Volatility Index (VIX) fell to its lowest level in roughly a month (14.80).⁴ As a general rule, option premiums typically share a tight correlation with volatility. However, they continued to trade at elevated levels, and the premiums received by the Global X S&P 500 Covered Call ETF (XYLD) and the Global X Nasdaq 100 Covered Call ETF (QYLD) rose about 26%, month to month, to 1.94% and 2.68%, respectively.
• With the Federal Open Market Committee’s first rate cut widely anticipated at its September 18th meeting, investors likely looked to a cooling July Consumer Price Index reading and an encouraging retail sales report to give legs to the recent market rally.⁵ This may remain the narrative as investors eye the possibility of a soft landing. However, the geopolitical backdrop, headlined by the ongoing Presidential election race taking place within the United States, could still give way to some market volatility en route to economic stability.