Monthly Covered Call Commentary

The Global X Research Team is pleased to announce the release of its Monthly Covered Call Report, featuring the premium and distribution values attained by its roster of covered call funds in April of 2024. The key takeaways below, as well as those highlighted within the report, recap some of the most pivotal undertakings to have taken place across the markets during the April roll period. They outline their influence over the option pricing environment and help substantiate changing investor sentiments as characterized by specific market indicators.

Covered Call Report – April 2024 Key Takeaways

• The April roll period for the Global X Covered Call product suite, which ran from March 15^th to April 19^th, represented the first time in roughly six roll periods wherein three of the four major domestic equity indices experienced a negative performance.¹ This is a credit to persistent inflation, which rose for the second-consecutive period in March according to the U.S. consumer price index, and geopolitical pressure as tensions were heating up in the Middle East.² In this environment, the potential benefits of covered call option writing were put on display, with Global X’s 100% covered, index-based strategies reaping gains from option premia, while the markets trended lower.
• The change in market direction contributed to the rising volatility trend that equities have been experiencing, of late. Indeed, the Cboe Volatility Index (VIX) and the Cboe Nasdaq 100 Volatility Index (VXN) have now advanced over four-consecutive roll periods and are trading back in the vicinity of their long-term averages.³ The undertaking was not isolated to the primary indexes, however, with implied volatility measures associated with our emerging markets and 50% covered, sector-based funds that track financial and information technology companies rising, as well.⁴
• Although volatility measures for the indexes and funds that are tracked by the Global X Covered Call suite increased virtually across the board, premium values did not necessarily follow suit. This stemmed from softening investor sentiment, which can be explained by option trading volume that more-frequently favored put buying than in either of the previous two roll periods. Specifically, the Cboe Total Put/Call Ratio broke beyond the 1.2x plane twice during the roll period.⁵ This is an undertaking that hasn’t happened since October of 2023.

Performance quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. Performance current to the most recent month-end is available for XYLD, QYLD, RYLD, DJIA, XYLE, and QYLE.