Global X is one of the largest ETF issuers in North America. In this post, we will focus on their covered call ETFs whose main objective is to maximize dividend yield. In fact, Covered call ETFs are more and more popular among income oriented investos. Global X had issued various ETFs within this category with different strategies to cater to most investors.
List of High income Vanguard covered call ETFs
| High income ETFs from Vanguard |
| DJIA -Global X Dow 30 Covered Call ETF |
| QYLD -Global X NASDAQ 100 Covered Call ETF |
| XYLD -Global X S&P 500 Covered Call ETF |
| RYLD -Global X Russell 2000 Covered Call ETF |
| QYLG -Global X Nasdaq 100 Covered Call & Growth ETF |
| XYLG -Global X S&P 500 Covered Call & Growth ETF |
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Strategy: summary table
| Covered Call ETFs DJIA, QYLD, XYLD, RYLD | Covered Call & Growth ETFs QYLG, XYLG | |
| Strategy Overview | Buy reference index components, write monthly At The Money index calls on 100% of the fund’s portfolio in an effort to maximize income. | Buy reference index components, write monthly At The Money index calls on 50% of the fund’s portfolio for income with some upside potential. |
| ETFs | DJIA, QYLD, XYLD, RYLD | QYLG, XYLG |
| Strategy | Sells At The Money Covered Calls (on 100% of assets) 100% of the upside is forfeited | Sells At The Money Covered Calls (on 50% of assets) 50% of the upside is forfeited |
| Dividend Frequency | Monthly | Monthly |
Asset under management and inception date
Performance comparison
Dividend yield cmparison
| Symbol | Div Yld | MER |
|---|---|---|
| DJIA | 11% | 0,61 |
| QYLD | 13.74% | 0,61% |
| XYLD | 13.42% | 0,60% |
| RYLD | 13.50% | 0,55% |
| QYLG | 6.89% | 0,61% |
| XYLG | 6.43% | 0,60% |
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QYLD -Global X NASDAQ 100 Covered Call ETF
QYLD is a passive index ETF that uses a covered call strategy to enhance yield and lower volatility. The fund was created by Global X and tracks the Nasdaq 100. The manager follows a “covered call” or “buy-write” strategy, in which the Fund buys the stocks in the Nasdaq 100 Index and “writes” or “sells” corresponding call options on the same index.
Is QYLD a good investment?
Positives
- Attractive yield thanks to money earned issuing call options;
- Lower volatility than investing in a NASDAQ 100 ETF such as QQQ;
- Suits conservative investors and income seekers;
- High volatility usually increases the premiums earned by the fund;
- Saves you time and effort (if you were youself intesreted on writing call options in the NASDAQ 100;
- Liquidity: the fund has over 6 Billion dollars assets under management.
Negatives
- Poor performance. You are essentially giving up on the upside potentiel of the NASDAQ 100;
- The strategy of covered calls becomes ineffective in an unpredictable market;
- QYLD is dominated by Tech firms so it’s far from being a diversified inevestment;
- High fees (0.60% total expense ratio).
QYLD Top ten holdings
| Net Assets (%) | Name |
|---|---|
| 11.85 | APPLE INC |
| 11.79 | MICROSOFT CORP |
| 6.54 | AMAZON.COM INC |
| 3.91 | ALPHABET INC-CL C |
| 3.88 | ALPHABET INC-CL A |
| 3.66 | NVIDIA CORP |
| 2.75 | TESLA INC |
| 2.72 | META PLATFORMS INC |
| 2.08 | PEPSICO INC |
| 2.03 | BROADCOM INC |
XYLD -Global X S&P 500 Covered Call ETF
XYLD is a passive index ETF that uses a covered call strategy to enhance yield and lower volatility. The fund was created by Global X and tracks the S&P500. The manager follows a “covered call” or “buy-write” strategy, in which the Fund buys the stocks in the S&P 500 Index and “writes” or “sells” corresponding call options on the same index. So far, XYLD has paid monthly distributions 9 years running.
Is XYLD a good investment?
Positives
- Attractive yield thanks to money earned issuing call options;
- Lower volatility than investing in the S&P500 ETF such as SPY;
- Suits conservative investors and income seekers;
- High volatility usually increases the premiums earned by the fund;
- Saves you time and effort (if you were youself intesreted on writing call options in the S&P 500
- Liquidity: the fund has over 6 Billion dollars assets under management
- XYLD is a diversified inevestment
Volatility comparison: XYLD has a lower volatility than the S&P 500 (source of graphic: portfoliolabs.com)
Negatives
- Poor performance. You are essentially giving up on the upside potentiel of the S&P 500
- The strategy of covered calls becomes ineffective in an unpredictable market
Top Holdings
| Net Assets (%) | Name |
|---|---|
| 6.28 | APPLE INC |
| 5.37 | MICROSOFT CORP |
| 2.58 | AMAZON.COM INC |
| 1.73 | ALPHABET INC-CL A |
| 1.71 | BERKSHIRE HATH-B |
| 1.55 | ALPHABET INC-CL C |
| 1.43 | EXXON MOBIL CORP |
| 1.41 | UNITEDHEALTH GROUP INC |
| 1.38 | JOHNSON & JOHNSON |
| 1.30 | NVIDIA CORP |
RYLD -Global X Russell 2000 Covered Call ETF
RYLD is an index ETF with an active covered call strategy in place to enhance yield. The index tracked is the Russell 2000, which consists of small to mid cap stocks. This fund is different than XYLD or QYLD because the focus here is not on large cap stocks. When investing in small caps, investors hope usually for higher growth. Small caps are also known to outperform large caps in begenning of the growth phase of the economy.
RYLD writes call options on the Russell 2000 Index (a succession of one-month at-the-money covered call options). The fund does not use leverage.
The Russel 2000 top three holdings are Ovintiv, Avis Budget Group, and Antero Resources.
Top Holdings
| Net Assets (%) | Name |
|---|---|
| 31.40 | VANGUARD RUSSELL 2000 ETF |
| 0.23 | IRIDIUM COMMUNIC |
| 0.23 | CROCS INC |
| 0.22 | INSPIRE MEDICAL |
| 0.21 | HALOZYME THERAPEUTICS INC |
| 0.21 | MATADOR RESOURCES CO |
| 0.21 | EMCOR GROUP INC |
| 0.21 | TEXAS ROADHOUSE INC |
| 0.20 | RBC BEARINGS INC |
| 0.20 | AGREE REALTY CORP |
QYLG -Global X Nasdaq 100 Covered Call & Growth ETF
As shown in the table above, summary of strategies. This fund is one of the ETFs whose objective is to seek both growth and income. Therefore, the strategy in place uses covered call options, however, on only 50% of the portfolio. In other words, QYLG is similar to QYLD but it will offer less dividends and more room for growth. Besides, in normal market conditions, QYLG will be more volatile than QYLD.
As its name implies, QYLG is an index fund and is replicating the portfolio constituents of the Nasdaq 100.
Top Holdings
| Net Assets (%) | Name |
|---|---|
| 11.84 | APPLE INC |
| 11.78 | MICROSOFT CORP |
| 6.54 | AMAZON.COM INC |
| 3.91 | ALPHABET INC-CL C |
| 3.87 | ALPHABET INC-CL A |
| 3.66 | NVIDIA CORP |
| 2.75 | TESLA INC |
| 2.72 | META PLATFORMS INC |
| 2.07 | PEPSICO INC |
| 2.02 | BROADCOM INC |
XYLG -Global X S&P 500 Covered Call & Growth ETF
As shown in the table above, summary of strategies. This fund is one of the ETFs whose objective is to seek both growth and income. Therefore, the strategy in place uses covered call options, however, on only 50% of the portfolio. In other words, XYLG is similar to XYLD but it will offer less dividends and more room for growth. Besides, in normal market conditions, XYLG will be more volatile than XYLD.
As its name implies, XYLG is an index fund and is replicating the portfolio constituents of the S&P 500.
XYLG – Top Holdings
| Net Assets (%) | Name |
|---|---|
| 6.23 | APPLE INC |
| 5.33 | MICROSOFT CORP |
| 2.56 | AMAZON.COM INC |
| 1.71 | ALPHABET INC-CL A |
| 1.69 | BERKSHIRE HATH-B |
| 1.53 | ALPHABET INC-CL C |
| 1.41 | EXXON MOBIL CORP |
| 1.39 | UNITEDHEALTH GROUP INC |
| 1.37 | JOHNSON & JOHNSON |
| 1.29 | NVIDIA CORP |
XYLG – Sector allocation
| SECTOR | WEIGHT (%) |
|---|---|
| Information Technology | 25.6 |
| Health Care | 15.9 |
| Financials | 11.6 |
| Consumer Discretionary | 9.8 |
| Industrials | 8.8 |
| Communication Services | 7.3 |
| Consumer Staples | 7.2 |
| Energy | 5.2 |
| Utilities | 3.2 |
| Materials | 2.7 |
DJIA -Global X Dow 30 Covered Call ETF
This fund allows investors to track 30 Dow stocks and generate income through issuing covered call options. DJIA is less diversified than XYLD, since the S&P 500 is much larger and broader than the Dow 30.
The 30 companies making up the index are mostly bluechips.
DJIA Top 10 holdings
