XYLD: There Are Better Alternatives In The Buy-Write Space

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The Global X S&P 500 Covered Call ETF systematically writes 1-month call options, leading to underperformance compared to actively managed peers like EOI, ETV, and XDTE.XYLD's strategy offers lower ...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nXYLD: There Are Better Alternatives In The Buy-Write Space\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-10-18 08:47 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4727512-xyld-etf-there-better-alternatives-in-buy-write-space><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>The Global X S&P 500 Covered Call ETF systematically writes 1-month call options, leading to underperformance compared to actively managed peers like EOI, ETV, and XDTE.XYLD's strategy offers lower ...</p>\n\n<a href=\"https://seekingalpha.com/article/4727512-xyld-etf-there-better-alternatives-in-buy-write-space\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4588","symbol_name":"碎股","start_time":0,"source_url":"https://seekingalpha.com/article/4727512-xyld-etf-there-better-alternatives-in-buy-write-space","article_id":"2476849561","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2156697480/image_2156697480.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2476849561","pubTimestamp":1729212466,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"The Global X S&P 500 Covered Call ETF systematically writes 1-month call options, leading to underperformance compared to actively managed peers like EOI, ETV, and XDTE.XYLD's strategy offers lower volatility and better downside protection, evident from its smaller loss in 2022 compared to the S&P 500.Actively managed funds, especially those using zero-day options like XDTE, outperform XYLD in bull markets by better monetizing short-term trends and events.XYLD is recommended for recessionary outlooks due to its longer option tenors capturing larger premiums, providing a buffer during market downturns.   Images By Tang Ming Tung/DigitalVision via Getty Images Thesis The Global X S&P 500 Covered Call ETF  is the better known buy-write exchange-traded funds. With an AUM in excess of $2.8 billion, the ETF is the main player in the space. While we have covered numerous CEFs in this cohort recently, the last time we looked at XYLD was three years back. Given today's high volatility environme","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4588":"碎股","XYLD":"Global X S&P 500 Covered Call ETF","BK4585":"ETF&股票定投概念"},"translate_title":"XYLD：买卖领域有更好的选择","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"XYLD":0.9},"content_text":"The Global X S&P 500 Covered Call ETF systematically writes 1-month call options, leading to underperformance compared to actively managed peers like EOI, ETV, and XDTE.XYLD's strategy offers lower volatility and better downside protection, evident from its smaller loss in 2022 compared to the S&P 500.Actively managed funds, especially those using zero-day options like XDTE, outperform XYLD in bull markets by better monetizing short-term trends and events.XYLD is recommended for recessionary outlooks due to its longer option tenors capturing larger premiums, providing a buffer during market downturns.   Images By Tang Ming Tung/DigitalVision via Getty Images Thesis The Global X S&P 500 Covered Call ETF (NYSEARCA:XYLD) is the better known buy-write exchange-traded funds. With an AUM in excess of $2.8 billion, the ETF is the main player in the space. While we have covered numerous CEFs in this cohort recently, the last time we looked at XYLD was three years back. Given today's high volatility environment and the advent of many buy-write funds, we are going to have a closer look at this ETF, its construction and mechanics, and outline why we believe other alternatives are better than this name. What does XYLD actually do? As per its own literature, XYLD: The Global X S&P 500 Covered Call ETF 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. The fund holds the individual stocks outright and then writes covered calls on the S&P 500 index. Its current positioning is a reflection of its strategy: Holdings (Fund Website) On one hand we have the individual names mirroring the S&P 500 composition, and on the options side we have an October 18, 2024 short call option position. Buy-write funds are very common these days, and what is more important here is the tenor of the options used by the fund. The name aims to follow the Cboe S&P 500 Buy-Write Index. As per the index definition, the tenor of the options used is 1 month: The Cboe S&P 500 BuyWrite Index (BXM) is designed to measure the total rate of return of a hypothetical “covered call” strategy applied to the S&P 500 Index. This strategy consists of a hypothetical portfolio consisting of a “long” position indexed to the S&P 500 Index on which are deemed sold a succession of one month, at-the-money call options on the S&P 500 Index listed on the Cboe Options Exchange. We refer to this hypothetical portfolio as the “covered S&P 500 Index portfolio”. XYLD therefore harvests one month S&P 500 volatility via its written call options. From a structuring angle, the name is basically harvesting the VIX outright, with the index meant to capture 30-day volatility. What makes XYLD particular is the systematic strategy with no active management. This translates into the ETF continuously rolling its strategy irrespective of market events or arbitrages. We are going to show you next why this type of strategy underperforms. Is shorting 1-month volatility competitive? What we have outlined above is that XYLD does its VIX monetization in a systematic fashion, and rolls 1-month call options. While this methodology is ultimately a long S&P 500 position and thus delivers robust long-term results, the ETF is not competitive when looking at its actively managed peers which employ different tenors: Data by YCharts When comparing the ETF to some Eaton Vance peers, a picture is worth a thousand words. We are comparing the name to the Eaton Vance Tax-Managed Buy-Write Opp (ETV), the Eaton Vance Enhanced Equity Income Fund (EOI) and the S&P 500 outright. XYLD is the clear underperformer on a long-term time-frame, with the other names up more than 2x. We have just covered a new name in the ETF buy-write arena, namely the Roundhill S&P 500 0DTE Covered Call Strategy ETF (BATS:XDTE) which is a much better alternative to XYLD. Since inception, XDTE has managed to actually outperform the S&P 500 and its peers:   Total Returns (YCharts) This tells us that active funds are better than systematic ones in this instance, and constantly rolling 1-month calls is not the best way to extract dividends from the S&P 500. Therefore, in our opinion XYLD will be a mediocre long-term performer, especially due to the fund's inability to monetize short-term trends or events, items which active funds can correctly manage. What the fund does achieve though through its strategy is a lower volatility profile. The name has a low 10% standard deviation versus roughly 18% for the rest of the cohort, and comes with a 0.21 Sharpe ratio. These numbers though are not compelling enough in today's environment where buffer funds have appeared, names which offer a much better collared return profile for the index. Risk factors Just like its peers, XYLD will suffer if there is a recession. However, unlike the names that use shorter dated tenors, XYLD does buffer to a larger extent down moves: Performance (Morningstar) The fund was down only -12% in 2022 when the index was down -18%, and this is mainly due to the larger option premiums received when doing 1-month calls. The longer the tenor for a written call, the larger the received premium. Thus the ETF was able to have a larger down buffer during the negative 2022 market performance. Conclusion  XYLD is an equity buy-write exchange-traded fund. The ETF holds a portfolio of stocks mirroring the S&P 500 and systematically writes rolling 1-month call options on the index. The fund has achieved robust long-term results given its exposure to the S&P 500, but has trailed the index and its peers in the CEF space quite significantly. Furthermore, the newly launched XDTE has shown much better results via an active management and the utilization of zero day options. What XYLD brings to the table versus its peers is a better performance during down years, with the ETF's longer tenors for its options better capturing options premiums and thus buffering the downside. We are of the opinion that EOI, ETV and XDTE represent better alternatives during a bull market, while XYLD is favored if the investor's outlook is recessionary.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":1,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2476849561"}