Strategies That Make Sense:
CI First Asset Covered Call Strategies
Making investment decisions on behalf of your clients in an extremely volatile market can be a challenging and nerve-racking process.
However, the very nature of these markets creates unique opportunities, one of them being covered call strategies. Market volatility has increased option premiums to levels rarely seen. This income generation opportunity provides protection that can lower your clients’ downside risk, reduce volatility, and provide attractive high yields in a very low interest rate environment.
CI First Asset Covered Call strategies generally consist of an equally weighted portfolio of companies targeting a sector or segment of the market while writing monthly at-the-money call options on 25% of the portfolio.
As you can see below, the income currently being generated from the written call options and the portfolio’s dividends is substantial. Also, the vast majority of the portfolio is uncovered, allowing one to capitalize on the appreciation of the underlying securities in the portfolio.
Portfolio Income : Covered Call ETFs
|ETF||Ticker(s)||Option Yield1||Dividend Yield2||Total Yield|
|CI First Asset Gold+ Giants Covered Call ETF||CGXF||14.35%||1.29%||15.64%|
|CI First Asset Tech Giants Covered Call ETF||TXF / TXF.B||13.93%||1.10%||15.03%|
|CI First Asset U.S. & Canada Lifeco Income ETF||FLI||7.69%||4.88%||12.57%|
|CI First Asset Energy Giants Covered Call ETF||NXF / NXF.B||10.07%||7.04%||17.11%|
|CI First Asset CanBanc Income Class ETF||CIC||3.76%||5.38%||9.14%|
|CI First Asset Health Care Giants Covered Call ETF||FHI / FHI.B||9.74%||2.13%||11.87%|
|Source: CI Investments Inc., as at October 31, 2020.
1Gross Option Premiums represent those received on October 16, 2020
2The Current Dividend Yield represents the gross yield on the ETF's underlying portfolio of securities. It is not the yield, or the distribution investors will receive by virtue of an investment in the ETF.
In an environment where yields are low and volatility levels are high, CI First Asset Covered Call strategies provide a compelling solution to these challenges.
For more information, please contact your dedicated ETF specialist.