Global X launches three covered call ETFs

Global X ETFs has launched Australia's first S&P/ASX 200 passive covered call exchange traded fund - the Global X S&P/ASX 200 Covered Call ETF (ASX Code: AYLD) - which will track the S&P/ASX BuyWrite Index.

Global X has also listed the Global X Nasdaq 100 Covered Call ETF (ASX Code: QYLD), which will track the Cboe Nasdaq-100 BuyWrite V2 Index; and the Global X S&P 500 Covered Call ETF (ASX Code: UYLD), which tracks the Cboe S&P 500 BuyWrite Index. Those two funds are already available in the US.

"AYLD aims to enhance income potential and reduce portfolio volatility compared with outright share ownership. As the first options strategy ETF listed over an index, investors can access a long back history of performance by reviewing the index history supplied by S&P," ASX head of equity market sales and equity derivatives, Graham O'Brien, said.

A covered call (also called a buy-write) is an options trading strategy that involves selling call options (the option to buy a stock at a certain price for certain period of time) over stocks an investor already owns.

Selling a call option generates income in the form of a premium. Global X points out that investors selling call options are still eligible for dividends and franking credits from their shareholdings.

"We consistently hear how important income is to investors across all age groups. We see options strategies, incorporated in ETFs, as a great entry point for investors to supplement existing income sources like dividends or coupons from bonds," Blair Hannon, head of investment strategy at Global X, said.