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Monthly Covered Call Commentary

Jul 17, 2023

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The Global X Research Team is pleased to release the distribution and premium numbers for our covered call ETFs for June 2023. Global X’s Covered Call suite of ETFs generally invest in the underlying securities of an index and sell call options on that index, an ETF tracking the underlying equity index, or a similar equity index. These strategies are designed to provide investors with an alternative source of income, while offering different sources of risks and returns to an income-oriented portfolio.

Click here to download the June 2023 Covered Call Report

Mixed economic data including a higher-than-expected unemployment rate failed to disrupt the market’s upward trajectory during the most recent roll period for the Global X Covered Call suite.1 Indeed, even the Russell 2000 Total Return Index, which had been trading in rangebound fashion since falling precipitously in value in early March, broke out to experience a 5.90% gain from May 19th to June 16th.2 Investors gave credence to the falling levels of inflation being experienced within the United States, remaining stoic even as the Federal Reserve hinted at the potential for two additional rate hikes by the end of this year.3, 4 All this took place as the VIX volatility index, characterizing market risk using data derived from the S&P 500, fell below the 13 level for the first time since January of 2020.5

Typically, reduced measures of volatility have a negative impact on premiums associated with covered call strategies. However, discounting Global X’s sector-focused Covered Call and Growth funds, premium percentages across the broader scope of the Global X Covered Call suite rose in the June roll period. The happening underscores elevated demand for call options stemming from both a low cost of capital and an uncertain outlook for market movement in the near term.

1As a general guideline, the monthly distribution of QYLD, XYLD, RYLD, DJIA, QYLE & XYLE is approximately capped at the lower of: a) half of premiums received, or b) 1% of net asset value (NAV). For QYLG, XYLG, RYLG, TYLG, HYLG, & FYLG, the monthly distribution is approximately capped at the lower of: a) half of premiums received, or b) 0.5% of net asset value (NAV). The excess amount of option premiums received, if applicable, is reinvested into the fund. Year-end distributions can exceed the general guideline due to capital gains that are paid out at the end of the year.

For performance data current to the most recent month- or quarter-end or a copy of the Fund prospectus, please visit QYLD, QYLE, XYLD, XYLE, DJIA, RYLD, QYLG, XYLG, RYLG, TYLG, HYLG, FYLG.

Fund Premiums and Implied Index Volatility

Disclaimer: Options Premiums vs. Implied Volatility graphs include implied volatility for the Nasdaq 100, S&P 500, Russell 2000, and Dow Jones Industrial Average Indexes. QYLE, QYLG, XYLG, and RYLG write covered calls on these same, aforementioned equity indices, thus, their premiums are not displayed here. TYLG, HYLG, and FYLG have only rolled their options portfolios five times while XYLE has only rolled its options portfolio two times, therefore Options Premiums vs. Implied Volatility graphs are currently not displayed for these ETFs and are expected to be added once more option premium data is received.

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To learn more about our covered call options, read the latest research from Global X, including:

Related ETFs

QYLD – Global X Nasdaq 100 Covered Call ETF

XYLD – Global X S&P 500 Covered Call ETF

RYLD- Global X Russell 2000 Covered Call ETF

DJIA – Global X Dow 30 Covered Call ETF

QYLG – Global X Nasdaq 100 Covered Call & Growth ETF

XYLG – Global X S&P 500 Covered Call & Growth ETF

RYLG – Global X Russell 2000 Covered Call & Growth ETF

TYLG – Global X Information Technology Covered Call & Growth ETF

HYLG – Global X Health Care Covered Call & Growth ETF

FYLG – Global X Financials Covered Call & Growth ETF

QYLE – Global X Nasdaq 100 ESG Covered Call ETF

XYLE – Global X S&P 500 ESG Covered Call ETF

Click the fund name above to view current holdings. Holdings are subject to change. Current and future holdings are subject to risk.

Category: Articles

Topics: Dividends, Income, 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 in the Funds 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 engages 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 continue 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 index’s current market price. QYLD, QYLE, DJIA, QYLG, TYLG, HYLG, and FYLG are non-diversified.

Companies with favorable ESG attributes may underperform the stock market as a whole. As a result, QYLE and XYLE may underperform other funds that do not screen companies based on ESG attributes. The criteria used to select companies for investment may result in the Fund investing in securities, industries or sectors that underperform the market as a whole, forgoing opportunities to invest in securities that might otherwise be advantageous to buy or underperform other funds screened for ESG standards.

Index returns are for illustrative purposes only and do not represent actual fund performance. Index returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.

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.

This material must be preceded or accompanied by a current full or summary prospectus. Investors should read it carefully before investing or sending money.

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. 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.