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 November 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 November 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 – November 2024 Key Takeaways

• During the November roll period for the Global X suite of covered call products, stretching from October 18th to November 15th, volatility measures that characterize the movements of the major domestic equity indices initially exhibited an upward trajectory before reversing course and ultimately closing lower. For the Cboe Volatility Index, in particular, the roll period featured its highest peak since August, in an advance that was fueled by a pair of megacap names reporting disappointing guidance pertaining to costs tied to artificial intelligence investments aftermarket on October 30^th.¹ The news was quickly digested, however, and the S&P 500 and Nasdaq 100 would go on to appreciate 2.97% and 2.57% on a total return basis, respectively, over the balance of the roll period.²
• The aforementioned volatility spike and the market’s subsequent recovery amounted to relatively flat performances for large-cap indices like the S&P 500 and Nasdaq 100 over the course of the November roll period.³ Investors were provided some catalysts to get there, however, with the Federal Open Market Committee deciding to lower the federal funds interest rate some 25 basis points.⁴ Further, the result of the Presidential election within the United States was deemed supportive of corporate earnings growth potential and the U.S. Dollar. To wit, the VIX experienced a sharp 21% decline on November 6th, the day after the result was announced, and remained relatively depressed thereafter.⁵
• As a product of the environment during the November roll period, Global X funds like the Global X Nasdaq 100 Covered Call ETF (QYLD) and the Global X S&P 500 Covered Call ETF (XYLD) attracted premiums that declined in the low- to mid-single digit percentage vicinity, on a month-to-month basis. The premiums remained near the high end of those acquired by the funds over the past year, however. Meanwhile, funds like the Global X Russell 2000 Covered Call ETF (RYLD) and the Global X Russell 2000 Covered Call & Growth ETF (RYLG) retrieved higher premiums, sequentially. Call values there were driven by widely oscillating equity prices for small-cap market constituents.