Covered call strategies can potentially augment a portfolio during periods of heightened volatility. The covered-call options allow an investor to hold a long position in an asset while simultaneously writing, or selling, call options on the same asset.
Traders would typically employ a covered-call strategy when they have a neutral view of the markets over the short-term and just gather income from the option premium. While these buy-write ETFs may not produce any phenomenal price returns compared to the broader equities markets, their underlying option strategy helped them generate outsized yields.
Looking at QYLD’s indexing methodology, the NDX call that is written will have about one month remaining to expiration, with an exercise price just above the prevailing index level, or slightly out of the money. QYLD has a 0.60% expense ratio and generated a 9.56% 12-month yield.
For more news and strategy on buy-write ETFs, visit our buy-write ETFs category.