The Global X Research Team is pleased to release the distribution and premium numbers for our covered call ETFs for December 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.
During the most recent roll period for the Global X Covered Call Suite, major U.S. equity indices including the Nasdaq 100, S&P 500, and Russell 2000 experienced material increases in value. Optimistic investor sentiment was spurred by encouraging economic data, including a Consumer Price Index report that illustrated price inflation of 3.1%.1 The figure signified an ongoing course reversal from the steady climb in year-over-year CPI published from July through September. Meantime, nonfarm payroll, which is a measure of U.S. employment encompassing construction, goods, and manufacturing rose by a better than expected 199,000 jobs in November, and the unemployment rate declined to 3.7%.2,3 These undertakings led the VIX and VXN volatility indexes, which depict volatility associated with the S&P 500 and Nasdaq 100, respectively, to track lower, with the VIX ranging from 11.81 to 14.31 and the VXN fluctuating between 13.56 to 17.87 during the roll period.4
Under these conditions, the December premiums collected by QYLD and XYLD came in relatively flat on a month-to-month basis, at 1.91% and 1.47%, respectively. The latest premiums can likely be attributed to implied volatility lingering at soft levels across both the S&P 500 and Nasdaq 100 Indexes.4
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, EMCC, QYLG, XYLG, RYLG, DYLG, TYLG, HYLG, FYLG.
1As a general guideline, the monthly distribution of QYLD, XYLD, RYLD, DJIA, EMCC, 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
Implied volatility of Financial, Health Care, and Technology Select Sector SPDR Funds are calculated using Bloomberg 30 Day IVOL at 100% Moneyness LIVE (Listed Implied Volatility Engine), which is a hypothetical implied volatility measure devised using historical option pricing data on the respective funds on contracts with 30 days until expiration and strike prices that are at the money.
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. DYLG, XYLE and EMCC have only rolled their options portfolios five, ten, and two 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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