The Global X Research Team is pleased to release the distribution and premium numbers for our covered call ETFs for October 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.
Implications stemming from both economic and political arenas likely influenced the Global X Covered Call suite during its most recent roll period spanning from September 15th to October 20th. Adverse geopolitical proceedings including the Israel-Hamas War, the United States House of Representatives’ untimely ousting of House Speaker Kevin McCarthy and delay in selecting a replacement, and the threat of another potential government shutdown were amongst the factors that likely led most major U.S. market indices to decline in value. Consequently, during the period, the VIX and VXN volatility indexes, which measure implied volatility for the S&P 500 and Nasdaq 100, respectively, rose to 21.71% and 25.31%, marking their highest levels attained since late March of this year.1
In this context, the October premiums generated by QYLD and XYLD increased from 2.36% and 1.66% to 2.81% and 2.21%, month to month. Additionally, many of the funds within the Global X Covered Call suite were able to perform distributions up to their respective cap levels. Looking ahead, with earning season in tow, conjecture surrounding the path of interest rates and persistent geopolitical uncertainty may well lead implied market volatility to continue tracking at elevated levels.
Past performance is not a guarantee of future results. For performance data current to the most recent month- or quarter-end or a copy of the Fund prospectus, please visit QYLD, QYLE, XYLD, XYLE, DJIA, RYLD, QYLG, XYLG, RYLG, DYLG, TYLG, HYLG, FYLG.
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, DYLG, 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, DYLG, 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 eleven times, while DYLG and XYLE have only rolled their options portfolios three and eight times, respectively. 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
- QYLD – Exploring the Case for a Nasdaq 100 Covered Call Strategy
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