March madness for the capital markets had less to do with basketball and more to do with volatility. However, that opened up opportunities for fixed income potential with the Global X Nasdaq 100 Covered Call ETF (QYLD).

The Nasdaq 100, in particular, was subject to a lot of volatility amid rising inflation. The index entered bear market territory in March as investors exited risk assets amid Russia’s invasion of Ukraine.

“It was a chaotic month as stocks rebounded from the selloff that began at the very end of 2021 and slumped as much as 20% into mid-March,” an Investing.com article notes. “The declines were triggered by the Federal Reserve’s decision, signaled in November, to raise interest rates in order to bring inflation under control.”

Income During Low Rates

The U.S. Federal Reserve did raise interest rates by 25 basis points recently, but for fixed income investors, it’s still a relatively low-yield environment. As such, they’re looking for opportunities for more yield — something QYLD has with a distribution yield of 12%.

QYLD follows a “covered call” or “buy-write” strategy in which QYLD buys stocks in the Nasdaq 100 Index and “writes” or “sells” corresponding call options on the same index. As such, not only does QYLD provide equities exposure, the ETF also offers an income component.

In today’s low-rate environment, fixed income investors understand how difficult it is to try to squeeze as much income as possible out of government debt. QYLD seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the CBOE Nasdaq-100 BuyWrite V2 Index.

QYLD offers investors:

  • High income potential: QYLD seeks to generate income through covered call writing, which historically produces higher yields in periods of volatility.
  • Monthly distributions: QYLD has made monthly distributions for six years running.
  • Efficient options execution: QYLD writes call options on the Nasdaq-100 Index, saving investors the time and expense of doing so individually.

QYLD Chart

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