Recently, covered call exchange-traded funds (ETFs) have emerged as a new alternative among individual investors. This investment strategy focuses on enduring market volatility while receiving monthly distributions rather than chasing short-term capital gains.
According to Koscom ETF Check on September 10, covered call ETFs have consistently ranked among the top performers over the past three months. The 'RISE 200 High Dividend Covered Call ATM' achieved a 17.57% return, placing it fourth among all ETFs, while the 'TIGER 200 Covered Call' secured seventh place with a 12.07% return.
Individual investors have also directed their funds toward covered call products. During the same period, the 'TIGER Dividend Covered Call Active' attracted 921.3 billion won, ranking seventh among the top 10 ETFs for net purchases, while the 'KODEX 200 Covered Call Active' came in tenth with 654.5 billion won. The 'TIGER Dividend Covered Call Active' saw its net assets increase by 884.5 billion won, placing it among the top three for net asset growth.
Covered call ETFs utilize a strategy where they hold underlying assets, such as stocks, while simultaneously selling call options on those assets to earn option premiums. Fund managers regularly distribute dividends to investors using the dividends from the underlying assets and the premiums from the sold options. In a sideways market or a mild bear market, option premiums can help offset losses from declining stock prices, providing a steady cash flow.
Park Woo-yeol, a researcher at Shinhan Investment Corp, noted, "The structure of covered call ETFs distributing call option premiums on a monthly basis has only recently gained traction." Kim Jae-seung, a researcher at Hyundai Motor Securities, commented, "The covered call strategy is advantageous in volatile markets where stock indices are flat or experience mild fluctuations."
As market demand grows, asset management firms are expanding their product offerings. This year alone, 10 new covered call ETFs have been listed among the 62 currently available on the domestic stock market. However, covered call ETFs are not advantageous in all market conditions. Due to the nature of the option selling strategy, they may not fully benefit from significant market upswings, potentially resulting in lower returns compared to traditional equity ETFs. While they can excel in highly volatile environments, investors are advised to consider their investment goals and market conditions when selecting these products.
* This article has been translated by AI.
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