The Global X Research Team is pleased to release the distribution and premium numbers for our covered call ETFs for June 2023. Global X’s Covered Call suite of ETFs generally invest in the underlying securities of an index and sell call options on that index, an ETF tracking the underlying equity index, or a similar equity index. These strategies are designed to provide investors with an alternative source of income, while offering different sources of risks and returns to an income-oriented portfolio.
Mixed economic data including a higher-than-expected unemployment rate failed to disrupt the market’s upward trajectory during the most recent roll period for the Global X Covered Call suite.1 Indeed, even the Russell 2000 Total Return Index, which had been trading in rangebound fashion since falling precipitously in value in early March, broke out to experience a 5.90% gain from May 19th to June 16th.2 Investors gave credence to the falling levels of inflation being experienced within the United States, remaining stoic even as the Federal Reserve hinted at the potential for two additional rate hikes by the end of this year.3, 4 All this took place as the VIX volatility index, characterizing market risk using data derived from the S&P 500, fell below the 13 level for the first time since January of 2020.5
Typically, reduced measures of volatility have a negative impact on premiums associated with covered call strategies. However, discounting Global X’s sector-focused Covered Call and Growth funds, premium percentages across the broader scope of the Global X Covered Call suite rose in the June roll period. The happening underscores elevated demand for call options stemming from both a low cost of capital and an uncertain outlook for market movement in the near term.
1As a general guideline, the monthly distribution of QYLD, XYLD, RYLD, DJIA, QYLE & XYLE is approximately capped at the lower of: a) half of premiums received, or b) 1% of net asset value (NAV). For QYLG, XYLG, RYLG, TYLG, HYLG, & FYLG, the monthly distribution is approximately capped at the lower of: a) half of premiums received, or b) 0.5% of net asset value (NAV). The excess amount of option premiums received, if applicable, is reinvested into the fund. Year-end distributions can exceed the general guideline due to capital gains that are paid out at the end of the year.
Fund Premiums and Implied Index Volatility
Disclaimer: Options Premiums vs. Implied Volatility graphs include implied volatility for the Nasdaq 100, S&P 500, Russell 2000, and Dow Jones Industrial Average Indexes. QYLE, QYLG, XYLG, and RYLG write covered calls on these same, aforementioned equity indices, thus, their premiums are not displayed here. TYLG, HYLG, and FYLG have only rolled their options portfolios five times while XYLE has only rolled its options portfolio two times, therefore Options Premiums vs. Implied Volatility graphs are currently not displayed for these ETFs and are expected to be added once more option premium data is received.
KEEP UP WITH THE LATEST RESEARCH FROM GLOBAL X
To learn more about our covered call options, read the latest research from Global X, including:
- Understanding the Income Landscape for Option Strategies
- Covered Call Strategies, Explained
- Risk Management Strategies for a Volatile Market Environment
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