Global X ETFs, the New York-based provider of ETFs has announced the launch of the Global X Nasdaq 100 Covered Call UCITS ETF (QYLD) on the Borsia Italiana, London Stock Exchange and Deutsche Börse Xetra.
The firm writes that the launch of QYLD represents Global X’s first synthetic product, which will replicate the underlying index via a total return swap. The fund is the firm’s latest addition to its family of income products, which is designed to help investors increase or diversify their portfolio’s yield potential.
In a rising rate environment, options-based strategies like covered calls may provide income for investors through higher options premiums due to greater levels of implied volatility priced into the market. By writing call options on a basket of equities while still holding the underlying assets, covered call strategies limit upside participation but can generate steady income during turbulent periods. These strategies, such as QYLD, can also diversify an investor’s sources of income away from equities and bonds, which historically struggle in rising rate environments.
“Amid central banks hiking interest rates, geopolitical instability, and volatile market conditions, covered call strategies can offer investors a critical buffer via elevated premiums,” says Rob Oliver, Head of Business Development for Global X ETFs in Europe. “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.”
With an expense ratio of 0.45 per cent, QYLD relies on a total return swap in order to replicate a “buy-write” strategy with the goal of lowering tracking errors and minimising overall costs.