With the equities market slowing down after a multi-year rally, investors may find opportunities in exchange traded funds that track buy-write or covered-call strategies.
“Many investors overlook buy-write/covered call strategies, as their objective is to provide monthly income without interest rate or duration risk,” according to Recon Capital.
For instance, the Recon Capital NASDAQ-100 Covered Call ETF (NasdaqGM: QYLD), which follows a covered-call strategy that targets Nasdaq-100 securities, shows a 9.08% 12-month yield. According to Recon Capital, QYLD has distributed between 0.61% to 1.06% per month since its inception on December 12, 2013.
“The monthly options premiums collected may serve as a buffer from market downswings in the Nasdaq 100 Index, lowering the volatility of the portfolio,” according to Recon Capital.
Along with the attractive yields, QYLD has been doing quite well, compared to the Nasdaq. Year-to-date, QYLD gained 6.1% while the PowerShares QQQ (NasdaqGM: QQQ), which tracks the Nasdaq-100, rose 8.7%.