“Covered calls have been used by professional investors for decades as a solution to incrase the yield and lower the volatility of equity returns over various market cycles,” according to Horizons. “A covered call strategy is generally used in a neutral to moderately bullish market environment, when a slow and steady rise in market prices is anticipated.”
The underlying indices utilize an “out-of-the-money” covered call strategy. The out-of-the-money call option will take a strike price higher than the current market price of the underlying security. Additionally, the ETFs issues a monthly dividend payout.
HSPX currently shows a 5.27% distribution yield while HFIN shows a 3.08% distribution yield.
For more information on covered call strategies, visit our buywrite category.
Financial advisors who are interested in learning more about investing in ETFs that implement the covered call strategy can register for the Tuesday, September 16 webcast here.