Global X ETFs has launched a new covered call ETF on the New York Stock Exchange. The Global X MSCI Emerging Markets Covered Call ETF (NYSE Arca: EMCC) seeks to generate income through covered call writing.
EMCC invests in the iShares Core MSCI Emerging Markets ETF (IEMG), then writes options that cover 100% of its notional holdings. The fund makes monthly distributions.
See more: “Covered Call ETFs Can Diversify Income Streams”
Potentially Higher Yields Through Emerging Markets
Since emerging markets have enjoyed growth at higher rates than their developed peers, they can potentially offer investors higher yields. Global X’s Director of Research Rohan Reddy said that “key emerging markets have rebounded since the Covid-19 pandemic.”
He added: “major headwinds such as central banks’ hawkishness have receded while tailwinds such as infrastructure investments have picked up.” Per Reddy, EMCC provides “access to a diverse set of geographies” that “offer potentially compelling yields.”
Growing Demand for Covered Call ETFs
EMCC joins a suite of covered call ETFs that includes the Global X NASDAQ 100 Covered Call ETF (QYLD) and the Global X S&P 500 Covered Call ETF (XYLD). In July, the ETF provider launched the Global X Dow 30 Covered Call & Growth ETF (DYLG), which writes covered calls on the Dow Jones Industrial Average.
Covered call strategies can offer a diversified potential source of income while potentially mitigating downside risks. Historically, these strategies required investors to trade options themselves. But the availability of ETFs that incorporate covered call strategies can help investors efficiently add these strategies to their portfolios.
“There has been growing demand for covered call ETFs in 2023,” said VettaFi’s Head of Research Todd Rosenbluth. “This new ETF will provide enhanced income and help lower the volatility of investing in emerging markets.”
EMCC charges 60 basis points.
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