Vanguard covered call etf

Top Vanguard Covered Call ETF to boost your income (US)

Vanugaurd 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. Vanuguard 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.
ETFsDJIA, QYLD, XYLD, RYLDQYLG, XYLG
StrategySells 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
MonthlyMonthly

Asset under management and inception date

Performance comparison

Dividend yield cmparison

SymbolDiv
Yld
MER
DJIA11%0,61
QYLD13.74%0,61%
XYLD13.42%0,60%
RYLD13.50%0,55%
QYLG6.89%0,61%
XYLG6.43%0,60%
Source: TD Market research and Yahoo Finance

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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.
Volatility comparison: QYLD has a lower volatility than the NASDAQ 100 (source of graphic: portfoliolabs.com)
In bear markets, QYLD protects investors and in normal circumstances will offer a better performance than the NASDAQ 100. The graphic depicts growth of 10K invested in the past 6 Months

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
11.85APPLE INC
11.79MICROSOFT CORP
6.54AMAZON.COM INC
3.91ALPHABET INC-CL C
3.88ALPHABET INC-CL A
3.66NVIDIA CORP
2.75TESLA INC
2.72META PLATFORMS INC
2.08PEPSICO INC
2.03BROADCOM 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
6.28APPLE INC
5.37MICROSOFT CORP
2.58AMAZON.COM INC
1.73ALPHABET INC-CL A
1.71BERKSHIRE HATH-B
1.55ALPHABET INC-CL C
1.43EXXON MOBIL CORP
1.41UNITEDHEALTH GROUP INC
1.38JOHNSON & JOHNSON
1.30NVIDIA 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
31.40VANGUARD RUSSELL 2000 ETF
0.23IRIDIUM COMMUNIC
0.23CROCS INC
0.22INSPIRE MEDICAL
0.21HALOZYME THERAPEUTICS INC
0.21MATADOR RESOURCES CO
0.21EMCOR GROUP INC
0.21TEXAS ROADHOUSE INC
0.20RBC BEARINGS INC
0.20AGREE 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
11.84APPLE INC
11.78MICROSOFT CORP
6.54AMAZON.COM INC
3.91ALPHABET INC-CL C
3.87ALPHABET INC-CL A
3.66NVIDIA CORP
2.75TESLA INC
2.72META PLATFORMS INC
2.07PEPSICO INC
2.02BROADCOM 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
6.23APPLE INC
5.33MICROSOFT CORP
2.56AMAZON.COM INC
1.71ALPHABET INC-CL A
1.69BERKSHIRE HATH-B
1.53ALPHABET INC-CL C
1.41EXXON MOBIL CORP
1.39UNITEDHEALTH GROUP INC
1.37JOHNSON & JOHNSON
1.29NVIDIA CORP

XYLG – Sector allocation

SECTORWEIGHT (%)
Information Technology25.6
Health Care15.9
Financials11.6
Consumer Discretionary9.8
Industrials8.8
Communication Services7.3
Consumer Staples7.2
Energy5.2
Utilities3.2
Materials2.7

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

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