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 September 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 September 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 – September 2024 Key Takeaways

• During the September roll period for the Global X suite of covered call products, which ran from August 16th, 2024 to September 20th, 2024, premiums associated with the single call options that were written by funds funds that harness the S&P 500, Nasdaq 100, and Russell 2000 as their equity indexes took a step back on a sequential basis. That said, relative to the call options that were written by the funds over the last year, these premiums remained in the upper quartile, supported by the elevated volatility trend that kicked off in mid-July. Indeed, in the September roll period the Cboe Volatility Index (VIX) only closed below 15 one time, and implied volatility associated with the Nasdaq 100 was similarly accommodating after the index lost about 5.5% of its value over the first three weeks of the term.^1,2
• While all four of the major domestic equity indices recorded an intra-roll-period trough on September 6th, the Nasdaq 100 went on to recoup the least of its value before options expired on September 20th. On the whole, it recorded total returns of 1.54% during the September roll, and en rote to this performance it witnessed widely fluctuating pricing pattens, illustrated by a Nasdaq 100 Volatility Index (VXN) that established its second–highest peak in the last year.³ While the market was flat, the volatility contributed to increased premiums, which supported The Global X Nasdaq 100 Covered Call ETF (QYLD).
• As the September roll period trended toward its conclusion, speculation over, and the subsequent realization of, a 50-basis-point federal funds rate cut had a pacifying impact on market volatility.⁴ The decline was noteworthy, with the VIX contracting off its highest peak since August 8th. However, with the first rate cut in the books and CME pricing in an 80% chance of two 25-basis-point rate cuts over the balance of the year, the VIX holding firm above the 15 level suggests uncertainty is stemming from other forces like the U.S. Presidential election and geopolitics.⁵