"Traditional dividend stocks have long been the go-to for income investors. However, covered call ETFs have emerged as a compelling alternative, generating income through options premiums rather than waiting for quarterly dividends. These funds systematically write call options against their equity holdings, collecting premiums that translate into monthly distributions regardless of whether underlying companies pay dividends. The strategy offers two key advantages: consistent monthly income and built-in downside cushioning."
"Global X S&P 500 Covered Call ETF ( NYSEARCA:XYLD) takes the most straightforward approach, writing covered calls on S&P 500 holdings. With $3.2 billion in assets and a 0.60% expense ratio, it offers broad market exposure while generating income through systematic option selling. The fund's 33.3% allocation to Information Technology mirrors S&P 500 concentration, with top holdings including NVIDIA at 7.79%, Apple at 6.88%, and Microsoft at 5.22%."
Covered-call ETFs generate income by systematically writing call options on equity holdings and collecting premiums that produce monthly distributions independent of corporate dividends. The approach provides consistent monthly income and some downside cushioning from option premiums, while sharply limiting upside during strong market rallies. Global X S&P 500 Covered Call ETF (NYSEARCA:XYLD) writes calls on S&P 500 holdings, manages $3.2 billion with a 0.60% expense ratio, and holds a 33.3% Information Technology allocation. Top holdings include NVIDIA (7.79%), Apple (6.88%), and Microsoft (5.22%). XYLD delivered 5.74% price appreciation last year, had 9% portfolio turnover, and emphasizes converting volatility into monthly cash flow.
Read at 24/7 Wall St.
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