On Monday, Global X ETFs, the New York-based provider of ETFs, announced the launch of the Global X Nasdaq 100 Covered Call & Growth ETF (QYLG) and the Global X S&P 500 Covered Call & Growth ETF (XYLG).
Investors face a historically low-yielding market amidst the backdrop of rock-bottom interest rates and tight credit spreads. At the same time, equity markets have offered investors robust growth since their March 2020 lows and continue to test new all-time highs. QYLG and XYLG are designed to balance upside participation in major US equity indexes with generating additional income potential through covered call writing.
The funds invest in the stocks held by their respective underlying indexes and write at-the-money monthly index options covering 50% of their portfolio. This approach seeks to capture approximately half of any upside potential of the equity indexes they track, while also potentially achieving additional income through the premiums received from writing options.
Eager For Alternatives
“In this extraordinarily low rate environment, investors continue to eagerly explore alternatives to fixed-income,” said Rohan Reddy, research analyst at Global X ETFs. “Increasingly, they are utilizing covered call strategies because of their high yield potential and minimal duration risk. Yet as markets touch on all-time highs, it’s become clear that investors want a balanced approach that can offer both higher yield and participation in the market’s growth. We’re thrilled to be bringing XYLG and QYLG to our clients as a solution for modern market dynamics.”
The funds join Global X’s existing suite of three covered call ETFs, which differ by writing options on the entirety of their underlying indices. The existing funds include the Global X Nasdaq 100 Covered Call ETF (QYLD), the Global X S&P 500 Covered Call ETF (XYLD), and the Global X Russell 2000 Covered Call ETF (RYLD). The suite totals over $1.3bn in assets under management as of September 17, 2020.
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