The covered call strategy has outperformed during bear markets, range-bound markets and slightly bullish conditions. However, during strong bull rallies, the covered call strategy has historically fallen behind as the underlying securities would surge through their strike prices.
The S&P 500 financial sector has been outperforming the broader S&P 500 benchmark. Month-to-date, financial stocks gained 2.7%, whereas the S&P 500 is up 2.4%. Year-to-date, the S&P 500 financials index increased 28.5% and the S&P 500 index rose 26.1%.
Horizons ETFs also offers the Horizons S&P 500 Covered Call ETF (NYSEArca: HSPX), which uses a covered call strategy on S&P 500 stocks. [Generating Income Through Covered-Call Writing ETFs]
For more information on the covered call strategy, visit our buywrite category.
Max Chen contributed to this article.