As volatility in the domestic stock market intensifies, individual investors are increasingly turning to covered call exchange-traded funds (ETFs). Demand for stable dividend-paying domestic products has expanded to include covered call ETFs based on major U.S. indices, reflecting a shift towards overseas assets.
According to Koscom ETF Check on July 28, the second most purchased ETF by individual investors in the past week was the 'TIGER Dividend Covered Call Active,' which saw a net inflow of 125.6 billion won. The 'KODEX 200 Covered Call Active' also ranked fifth with an inflow of 71.8 billion won. This trend suggests that investors are opting for covered call ETFs as a more stable alternative amid heightened market volatility.
Investment demand is rapidly spreading to products based on U.S. assets. The 'TIGER U.S. Nasdaq 100 Target Daily Covered Call' recorded a net inflow of 34.5 billion won, placing it 11th among individual purchases. Other notable entries include 'KODEX U.S. Nasdaq 100 Daily Covered Call OTM' (31.3 billion won, 13th), 'SOL 200 Target Weekly Covered Call' (26.6 billion won, 15th), and 'RISE U.S. Tech 100 Daily Fixed Covered Call' (20 billion won, 18th), all making the top 20 in net purchases. This indicates a broadening of investment opportunities beyond domestic dividend-covered call ETFs to include U.S. tech stocks and major indices.
Covered call ETFs employ a strategy where investors hold the underlying stocks while simultaneously selling call options on those assets to secure option premiums. Asset management firms use stock dividends and option premiums to provide regular distributions to investors. This strategy offers the advantage of relatively stable cash flow during periods of sideways or declining stock prices, as the income from option sales can offset some losses. However, it is important to note that significant stock price increases may limit upside gains due to the nature of option selling.
Market analysts suggest that the current environment of increased volatility highlights the strengths of the covered call strategy. On the same day, the KOSPI index fell by 732.09 points (10.84%), closing at 6023.66, marking the second-largest decline of the year since March 4. The index dropped more than 5% early in the session, further exacerbating the decline and significantly dampening investor sentiment.
In the securities industry, experts assess that the covered call ETF market continues to grow, with diversification in investment strategies. Ha Jae-seok, a researcher at NH Investment & Securities, stated, "The global options strategy ETF market is continuously expanding, centered around covered call ETFs. Recently, the presence of active covered call ETFs has also increased, and the key factor influencing the performance of covered call ETFs is ultimately the price direction of the underlying assets." He added that U.S. index covered call ETFs aim to pursue both growth and stability.
* This article has been translated by AI.
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