The March madness in the capital markets had less to do with basketball and more to do with volatility. However, this opened up opportunities for fixed income potential with the Global X Nasdaq 100 Covered Call ETF (QYLD).
The Nasdaq 100 in particular was subject to high volatility as inflation rose. The index entered bear market territory in March as investors exited risky assets amid the Russian invasion of Ukraine.
“It’s been a chaotic month as stocks rebounded from the sell-off that began in late 2021, falling as much as 20% through mid-March,” reads an Investing.com article. “The declines were prompted by the Federal Reserve’s decision signaled in November to bring them under control.”
Income during low rates
The US Federal Reserve recently hiked interest rates by 25 basis points, but it’s still a relatively low yield environment for fixed income investors. As a result, they’re looking for opportunities for more yield — something QYLD has, with a 12% payout yield.
QYLD follows a “covered call” or “buy-write” strategy in which QYLD purchases stocks of the Nasdaq 100 Index and “writes” or “sells” corresponding call options on the same index. As such, QYLD not only offers equity exposure, the ETF also offers an income component.
In today’s low interest rate environment, bond investors understand how difficult it is to squeeze as much yield as possible out of government debt. QYLD seeks to provide investment results that generally reflect the price and yield performance of the CBOE Nasdaq-100 BuyWrite V2 Index before fees and expenses.
QYLD offers investors:
- High Return Potential: QYLD seeks to generate returns by writing covered calls, which has historically resulted in higher returns during periods of volatility.
- Monthly Distributions: QYLD has made monthly distributions for six consecutive years.
- Efficient Options Execution: QYLD writes call options on the Nasdaq 100 index, saving investors the time and expense of doing it individually.
For more news, information and strategy, visit the Thematic Investing Channel.