Covered call ETFs typically invest in a diversified portfolio of stocks and utilize the covered call writing strategy on a portion of their holdings. By employing this strategy, the ETF can generate additional income for investors while still providing exposure to the underlying stocks in the portfolio.
This strategy aims to reduce volatility and provide a steady income stream. The ETF invests in stocks and sells call options, giving buyers the right to purchase the stocks at a predetermined price. If the stock price doesn't reach that price at the expiry date, the ETF keeps the premium as income. If the price does reach the predetermined level at the expiry date, the ETF raises cash to settle the option but still keeps the premium. While this strategy limits potential gains, it provides relative stability and income for investors.*
Covered call ETFs invest in stocks and sell call options on some of those stocks. Call options give buyers the right to buy the stock at a set price by a specific date. In exchange for selling the call options, the ETF receives a payment called a premium. If the stock price doesn't reach the set price before the expiration date, the call option expires without value, and the ETF keeps the premium as income. But if the stock price reaches or exceeds the set price, the ETF has to raise cash to settle the option at that price, while still keeping the premium. This strategy reduces portfolio volatility, provides income, and protects against market downturns.
Join Dennis Fok, Head of ETF Portfolio Management at Global X ETFs Hong Kong, as he explains the covered call strategy and how to utilise it hedge market downturns and generate potential income.
Stock Code | 3419 (HKD) 1 |
Ongoing Charges Over A Year 2 | 0.75% |
Inception Date | 28 Feb 2024 |
1 Investment involves risk. Before making any investment decision to invest in the Fund, investors should read the Fund’s Prospectus for details and the risk factors. Visit Global X ETFs Hong Kong website for more details relating to this Fund (including but not limited to the Fund’s iNAV, market price, performance, daily holdings and tracking difference / error). |
Stock Code | 3416 (HKD) 1 |
Ongoing Charges Over A Year 2 | 0.75% |
Inception Date | 28 Feb 2024 |
1 Investment involves risk. Before making any investment decision to invest in the Fund, investors should read the Fund’s Prospectus for details and the risk factors. Visit Global X ETFs Hong Kong website for more details relating to this Fund (including but not limited to the Fund’s iNAV, market price, performance, daily holdings and tracking difference / error). |