In Times of Uncertainty, This Play Can Unlock Opportunity | ETF Trends

In times of uncertainty, the need to generate monthly income becomes a priority, but it’s important to also remain poised for any upcoming rally. Investors can make a defensive play that can also provide a healthy monthly income stream potential.

In the upcoming webcast, In Times of Uncertainty, This Play Can Unlock Opportunity, Bill Belden, president of Amplify ETFs; Kevin Simpson, founder and CIO of Capital Wealth Planning, LLC; and Jane Edmondson, founder and CEO of EQM Indexes, will focus on dividend income payers that can help financial advisors shore up their clients’ portfolios and help generate monthly income to wait out the ongoing risks.

For instance, the Amplify CWP Enhanced Dividend Income ETF (DIVO) is an actively managed income-generating tool. The fund writes covered calls on individual holdings, not an index. Selling covered calls involve selling options on underlying securities in which an investor already holds long positions.

“Not everyone has the time or the confidence to screen, research, and purchase individual stocks, then continuously monitor their business operations and risks. The Amplify CWP Enhanced Dividend Income ETF was designed to provide investors with a high level of monthly income on a risk-adjusted basis,” according to Amplify ETFs.

This strategy aims to guard against downside in the underlying security, generate some profits in sideways markets, and bolster a portfolio’s income stream. Furthermore, the dividend and option income may provide lower share price volatility compared to the overall market during times of broad-based market declines.

A covered call is an instrument sold by the owner of a stock in return for a share of future appreciation of the stock during a defined period. This is a conservative income strategy as it provides two potential outcomes.

“First – the stock is sold at a higher price on the expiration date of the call option. In this scenario, the call writer keeps the option premium and also the appreciation of the underlying stock up to the call (or strike) price. The second possibility is the stock never exceeds the strike price during the period up to expiration. If this happens, the call writer keeps the option premium and also keeps the stock in the portfolio,” according to Amplify ETFs.

More recently, Amplify ETFs launched the actively managed Amplify International Enhanced Dividend Income ETF (NYSE Arca: IDVO). IDVO seeks to provide monthly income from international dividend-paying stocks in the form of American depository receipts (ADRs) and by opportunistically writing covered calls on those stocks. IDVO will invest in 30–50 securities that have been screened according to attributes such as earnings, cash flow, return on equity, market capitalization, and management track. Additionally, the use of tactical covered call writing on individual securities will lower risk and enhance total return.

“Historically, foreign companies can provide diversification if added to US-only portfolios. In many cases, these companies offer the potential for faster growth than typical domestic companies. Additionally, writing covered calls on these foreign stocks have historically provided higher premiums,” according to Amplify ETFs.

Financial advisors who are interested in learning more about dividend income generation can register for the Wednesday, November 16 webcast here.