The Global X Research Team is pleased to release the distribution and premium numbers for our covered call ETFs for July 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.
Equity markets within the United States have maintained their relative strength over the last few weeks. Consequently, volatility metrics as characterized by the VIX and VXN volatility indexes have remained somewhat muted.1 Investor sentiment has been supported by economic data indicating declining levels of inflation and a solid start to the second-quarter earnings season, with some 77% of S&P 500 companies that reported during the roll period through July 21st announcing better-than-expected results.2,3 That said, rising equity values and improving consumer confidence has led the Federal Reserve to only modestly take a step back from its hawkish tone, and resilient employment data is promoting the sentiment that they will need to keep interest rates higher for longer.4, 5
In this environment, premium values associated with the Global X Covered Call suite modestly declined, owing to softer underlying implied market volatility. That said, the Global X Nasdaq 100 Covered Call ETF (QYLD) and the Global X Russell 2000 Covered Call ETF (RYLD) were able to make distributions up to their respective caps and, from a total return perspective, QYLD was able to outperform its equity index.6
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 seven times while XYLE has only rolled its options portfolio four 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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