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 surged, with covered call ETFs based on major U.S. indices also ranking among the top net purchases, indicating 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. The recent increase in market volatility has led investors seeking stable cash flow to consider covered call ETFs as an alternative.
Investment demand is rapidly expanding 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, ranking 11th among individual net purchases. Following this, the '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) also made it into the top 20 for net purchases. This trend shows a broadening of investment options beyond domestic dividend-covered call ETFs to products based on U.S. tech stocks and major indices.
Covered call ETFs utilize a strategy where they hold the underlying stocks while simultaneously selling call options on those assets to secure option premiums. Asset management firms pay regular distributions to investors using stock dividends and option premiums. This strategy offers the advantage of providing relatively stable cash flow, as option selling profits can offset some losses during periods of stagnant or declining stock prices. 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 heightened 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 and continued to decline, 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 growing, 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, "Covered call ETFs based on major U.S. indices seek to balance growth and stability."
* This article has been translated by AI.
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