Objective research to aid investing decisions
Menu
Value Allocations for August 2019 (Final)
Cash TLT LQD SPY
Momentum Allocations for August 2019 (Final)
1st ETF 2nd ETF 3rd ETF

Are Equity Index Covered Call ETFs Working?

Posted in Equity Options

Is systematically selling covered call options on equity indexes, as implemented by exchange-traded funds (ETF), attractive? To investigate, we consider four equity covered call ETFs:

  1. Invesco S&P 500 BuyWrite ETF (PBP) - seeks to track the CBOE S&P 500 BuyWrite Index (BXM).
  2. Global X S&P 500 Covered Call ETF (HSPX) - seeks to track the CBOE S&P 500 2% OTM BuyWrite Index (BXY).
  3. Global X NASDAQ 100 Covered Call ETF (QYLD) - seeks to track the CBOE NASDAQ-100 BuyWrite Index (BXN).
  4. First Trust BuyWrite Income ETF (FTHI) - sells at-the-money to slightly out-of-the-money covered calls on the S&P 500 Index, laddered with expirations of less than one year (we use BXM as a benchmark).

We focus on average monthly return, standard deviation of monthly returns, sample period cumulative return and maximum drawdown (MaxDD) based on monthly data. We consider SPDR S&P 500 (SPY) and Invesco QQQ Trust (QQQ) as underlying stock indexes. Using monthly dividend-adjusted returns for the four covered call ETFs since inceptions and for all benchmarks/underlying indexes through June 2019, we find that:

Please or subscribe to continue reading...
Gain access to hundreds of premium articles, our momentum strategy, full RSS feeds, and more!  Learn more

Daily Email Updates
Login
Research Categories
Recent Research
Popular Posts