HSPX also represents an alternative to equity-based low volatility ETFs that so many investors have embraced in recent years. Due to the facts that some popular low volatility strategies put such a strong emphasis on volatility reduction and that HSPX is still a long equity ETF, some low volatility funds have lagged the covered call ETF for extended time frames.
“What this suggests is that covered calls are probably a better hold through a full market cycle, what is being observed with the low-vol strategies (which have delivered incredible performance over the last two months) is an anticipation of higher vol which has resulted in higher valuations,” notes Horizons.
Additionally, some low volatility ETFs often overweight defensive sectors, such as consumer staples and utilities. Playing defense with those groups often comes at a price, a high one at that because valuations for defensive sectors are often higher than the broader market. [Lukewarm View on Staples ETFs]