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Monthly Covered Call Commentary

Apr 18, 2024

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The Global X Research Team is pleased to release the distribution and premium numbers for our covered call ETFs for March 2024.

Key Takeaways

Takeaway 1 – Major Indexes Moved Higher Virtually Across the Board

During the March roll period for the Global X Covered Call suite of products, stretching from February 16th to March 15th, the market rally that kicked off more than four months ago continued to usher in higher values for the S&P 500, Nasdaq 100, Russell 2000, and Dow Jones Industrial Average. It reflected ongoing optimism over the potential for corporate earnings growth in the year ahead, as well as anticipation of the Federal Reserve’s first rate cut following a cycle of hikes that pushed the Federal Funds rate as high as 5.33%.1

Takeaway 2 – Markets and Volatility Traded Commensurately

Typically, the negative correlation that is shared between volatility and underlying market performance will see the two measures diverge from one period to another. In the March roll period, however, the S&P 500 and Nasdaq 100 delivered total returns of 2.36% and 0.77%, respectively, while the Cboe Volatility Index (VIX) and the Cboe Nasdaq 100 Volatility Index (VXN), which characterize volatility associated with these indices, migrated upward on a sequential basis to 14.41% and 19.25%.2 The undertaking led the Global X covered call funds that write contracts on these indices to attract higher premiums, month to month, and supported QYLD distributing up to its cap distribution level of 1.00%.

Takeaway 3 – Premiums Trended Higher For Essentially All Funds

Although volatility was somewhat of a mixed bag across the scope of the Global X Covered Call suite during the March roll, premiums attained by the funds were higher month to month with few exceptions. The undertaking likely reflected option skew becoming more bullish, with demand for calls driving up value.3 Broader implied volatility trends, which have exhibited a general upward trajectory dating back over the last three months, are also likely to have played a role, as the timetable pertaining to the Fed’s first interest rate cut continues to be pushed out.4

Click here for QYLD’s most recent month- and quarter-end performance.

Click here to download the Global X March Covered Call Report.

Category: Articles

Topics: Income Strategies

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Investing involves risk, including the possible loss of principal. Concentration in a particular industry or sector will subject the Funds to loss due to adverse occurrences that may affect that industry or sector. Investors should be willing to accept a high degree of volatility in the price of the fund’s shares and the possibility of significant losses.

The Funds engage in options trading. An option is a contract sold by one party to another that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a stock at an agreed upon price within a certain period or on a specific date. A covered call option involves holding a long position in a particular asset and writing a call option on that same asset with the goal of realizing additional income from the option premium. By selling covered call options, the funds limit their opportunity to profit from an increase in the price of the underlying index above the exercise price, but continues to bear the risk of a decline in the index. A liquid market may not exist for options held by the fund. While the fund receives premiums for writing the call options, the price it realizes from the exercise of an option could be substantially below the indices current market price.

QYLD, QYLE, DJIA, QYLG, DYLG, TYLG, HYLG, and FYLG are non-diversified.

Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns.  Indices are unmanaged and do not include the effect of fees, expenses or sales charges. Index returns are for illustrative purposes only and do not represent actual Fund performance. Past performance does not guarantee future results. One cannot invest directly in an index.

Carefully consider the funds’ investment objectives, risks, and charges and expenses before investing. This material must be preceded or accompanied by a current full or summary prospectus. Please read the prospectus carefully before investing.

Global X Management Company LLC serves as an advisor to Global X Funds. The Funds are distributed by SEI Investments Distribution Co. (SIDCO), which is not affiliated with Global X Management Company LLC or Mirae Asset Global Investments. Global X Funds are not sponsored, endorsed, issued, sold or promoted by Standard & Poors, MSCI, Dow Jones, NASDAQ, or Cboe nor do these companies make any representations regarding the advisability of investing in the Global X Funds. Neither SIDCO nor Global X is affiliated with Standard & Poors, MSCI, Dow Jones, NASDAQ, or Cboe.