Global X has introduced its first ‘buy-write’ ETF in Europe with the launch of a fund delivering a systematic covered call strategy based on the Nasdaq 100.
Rob Oliver, Head of Business Development for Global X ETFs in Europe.
The Global X Nasdaq 100 Covered Call UCITS ETF has been listed on London Stock Exchange in US dollars (QYLD LN) and pound sterling (QYLP LN) as well as on Deutsche Börse Xetra (QYLE GY) and Borsa Italiana (QYLD IM) in euros.
Widely considered the world’s pre-eminent growth index, the Nasdaq 100 consists of 100 of the largest US and international non-financial companies by market capitalization listed on Nasdaq, subject to various diversification requirements.
It includes companies across major industry groups including computer hardware and software, communications, retail/wholesale trade, and biotechnology.
Global X’s latest ETF uses a total return swap to track the Cboe Nasdaq-100 BuyWrite v2 Index which combines a long position in the Nasdaq 100 with a systematic covered call overlay.
A covered call is an options strategy whereby an investor holds a long position in an asset and sells or “writes” call options on that same asset in an attempt to generate more income (the additional income from the option’s premium) than the asset would otherwise provide on its own from dividends or other distributions.
The index writes one-month call options on the Nasdaq 100 for 100% of the portfolio’s value. The call options are written at-the-money and are rolled on a monthly basis.
Historically, during bear markets, range-bound markets, and modest bull markets, covered call strategies have generally outperformed their underlying securities. However, during strong bull markets, when the underlying securities may frequently rise through their strike prices, covered call strategies historically have tended to lag.
While covered call strategies do limit upside participation, they can generate steady income during turbulent periods and diversify an investor’s sources of yield away from equities and bonds which historically have struggled during rising rate environments.
The ETF comes with an expense ratio of 0.45%. Distributions are made to investors on a monthly basis.
Rob Oliver, Head of Business Development for Global X ETFs in Europe, said: “Amid central banks hiking interest rates, geopolitical instability, and volatile market conditions, covered call strategies can offer investors a critical buffer via elevated premiums. I’m thrilled to announce that Global X is bringing QYLD to investors as part of our growing family of income-based solutions that look beyond traditional fixed income.”
Global X offers ten covered call ETFs in the US. The suite, which includes funds based on the S&P 500, Nasdaq 100, Dow Jones Industrial Average, and Russell 2000 indices, houses many billions of dollars in assets under management.