Global X ETFs announced the launch of three new covered call ETFs covering the financials, healthcare, and information technology sectors of the S&P 500. The funds are Global X’s latest additions to its lineup of income funds, which offer investors ETF strategies that look beyond traditional fixed income to help increase or diversify a portfolio’s yield potential.
| Fund Name | Ticker | Gross Exp. | Net Exp.* | Underlying Index |
|---|---|---|---|---|
| Global X Financials Covered Call & Growth ETF | FYLG | 0.66% | 0.60% | Cboe S&P Financial Select Sector Half BuyWrite Index |
| Global X Health Care Covered Call & Growth ETF | HYLG | 0.66% | 0.60% | Cboe S&P Health Care Select Sector Half BuyWrite Index |
| Global X Information Technology Covered Call & Growth ETF | TYLG | 0.66% | 0.60% | Cboe S&P Technology Select Sector Half BuyWrite Index |
*Waivers are contractual and in effect until 3/1/24.
Advisor demand for enhanced income ETFs has climbed sharply in 2022 and Global X has been a beneficiary. The new ETFs follow in the successful footsteps of QYLD and XYLD providing more targeted sector exposure,” said Todd Rosenbluth, head of research at VettaFi.
The Consumer Price Index rose 7.7% from a year ago in October, as the pace of rising prices remained near 40-year highs. As the Federal Reserve and central banks around the world continue to hike rates to combat inflation, conditions can make it difficult for traditional equities and bonds to perform. Many investors are struggling to find asset classes that can help them to navigate volatility and manage for interest rate risk while maintaining their income objectives.
Covered call strategies can play an important role in the modern investor’s portfolio, offering a diversified potential source of income while mitigating downside risks. Historically, covered call strategies required investors to trade options themselves, a task requiring expertise and frequent hands-on trading. But the availability of ETFs that incorporate covered call strategies can help investors efficiently add these strategies to their portfolios.
These three new options funds’ underlying indexes measure the performance of a covered call strategy that holds a theoretical portfolio of the Select Sector index and sells a succession of one-month at-the-money covered call options on a respective sector ETF. Each Select Sector Half BuyWrite Index specifically reflects the performance of the component securities of the respective Select Sector Index combined with written at-the-money call options on a fund corresponding to roughly 50% of the value of the securities in the reference index.
“Covered Call & Growth Strategies can help investors to navigate choppy and sideways markets while still allowing them to capture upside,” said Rohan Reddy, director of research at Global X ETFs.
The funds will join the Global X Income suite of over 20 ETFs and over $17 billion in assets under management.
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