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Covered-call income comes at the cost of upside, but the size of that sacrifice varies dramatically. XYLD and QYLD sell monthly at-the-money calls that can heavily limit participation in sustained equity rallies.
Every time the ProShares S&P 500 High Income ETF (CBOE:ISPY) writes another daily call option, holders swap tomorrow's gains for today's yield.
Covered call ETFs promise double-digit yields from a broad equity index.
The ProShares S&P 500 High Income ETF (NYSEARCA:ISPY) charges 0.56% a year to run a daily
Investors have plenty of reasons to celebrate the covered call ETF boom. Covered call strategies have offered new ways to add income to portfolios.
Want current income for rising costs? ETFs have solutions, but not all are created equal; these funds offer both upside and income.
ProShares S&P 500 High Income ETF employs a daily covered call strategy via swaps, targeting a minimum 6% yield with monthly distributions. ISPY has underperformed SPY since inception, with irregular distributions, and a lower yield than key competitors. Given ISPY's short track record, inconsistent payouts, and less compelling risk/return profile, SPYI and GPIX are better alternatives.
In a recent ProShares webcast, Global Investment Strategist Simeon Hyman and Director of Investment Strategy Kieran Kirwan zeroed in on a persistent frustration for income-focused investors: why traditional covered call strategies tend to fall behind when markets rebound.
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