ETFs
Global X Launches Two New Covered Call ETFs | ETF Strategy
Based in New York World X has expanded its suite of systematic covered call strategies with the launch of two new ETFs based on quality U.S. dividend stocks and energy infrastructure companies.
Covered call strategies can generate diversified income compared to traditional sources of return.
THE ETF Global X S&P 500 Quality Dividend Covered Call (QDCC US) And Global X MLP & Energy Infrastructure Covered Call ETF (MLPD US) were listed on NYSE Arca with expense ratios of 0.35% and 0.60%, respectively.
A covered call is an options strategy whereby an investor holds a long position in an asset and sells or “sells” call options on that same asset in an attempt to generate more income (the additional income from the option premium) than the asset would otherwise provide. alone from dividends or other distributions.
Covered call strategies can play an important role in a portfolio, providing a diversified source of income while helping to potentially mitigate downside risk.
Historically, during bear markets, range-bound markets, and modest bull markets, covered call strategies have generally outperformed their underlying securities. However, during strong bull markets, when the underlying securities can frequently rise to their strike prices, covered call strategies have historically tended to lag.
Rohan Reddy, Director of Research at Global . Global quality.
Investment approach
QDCC invests in Global X S&P 500 Quality Dividend ETF (QDIV US) which consists of stocks of S&P500 which rank among the top 200 in the index universe in terms of quality and dividend yield.
The MLPD, for its part, invests in Global X MLP and Energy Infrastructure ETF (MLPX US) which consists of master limited partnerships (MLPs) and other U.S.-listed midstream energy infrastructure entities.
QDCC and MLPD then also sell one-month call options on their targeted ETFs equal to 100% of their portfolio value. When expiring call options are settled, new call options at the price expiring the following month are sold.
Global Nasdaq100, DJIA, Russell 2000And MSCI Emerging Markets indices, as well as strategies based on adapted ESG versions of the S&P 500 and Nasdaq 100.
The company also offers a wide range of Covered Call & Growth ETFs that provide long exposure to major stock indices while writing call options on the same indices equal to 50% of the fund’s portfolio value. The strategy therefore aims to provide regular income while allowing investors to capture half of the upside potential of the underlying index.