Recon Capital Advisors, a new entrant in the exchange traded fund arena, launched the first ETF to track a covered call strategy based on the Nasdaq-100.
The Recon Capital NASDAQ-100 Covered Call ETF (Nasdaq: QYLD) reportedly began trading Thursday, Dec. 12.
According to the latest prospectus filing, QYLD will try to reflect the performance of the CBOE NASDAQ-100 BuyWrite Index, which measures the return on call options written on the 100 companies included in the Nasdaq-100 through a “buy-write” or covered call strategy.
Specifically, the underlying index will write, or sell, a succession of one-month call options on the Nasdaq-100 Index and will cover the options by holding the underlying securities.
A covered call is an options strategy that takes a long position in an asset and sells or “writes” call options on that same security in an attempt to generate additional income through the sale of the call options. By utilizing a covered call strategy, an investor who owns a stock sells call options, and collects the income from the premiums paid by the buyer of the option. [A Covered Call ETF Helps Boost Your Income]
“In return for the payment of a premium to the Fund, a purchaser of the call options written by the Fund is entitled to receive a cash payment from the Fund equal to the difference between the value of the NASDAQ-100 Index and the exercise price of the option if the value of the option on the expiration date is above its exercise price,” according to the filing.