Concerned About Market Volatility? The Covered Call Strategy: Balancing Income and Risk Management
[For Hong Kong Investor Only] During significant market upswings, ETFs that employ a Covered Call strategy may not outperform their underlying indices. This is primarily because the main goal of the Covered Call strategy is to generate income by selling call options, which can result in underperformance in bull market conditions. Nevertheless, the Covered Call strategy offers notable advantages, particularly in terms of stable income potential#.
Additionally, by implementing a Covered Call strategy, we can effectively manage portfolio risk and achieve diversification. While there may be some limitations on returns during strong bull markets, Global X's two Covered Call ETFs are designed to provide monthly distributions*. By generating extra cash flow, the Covered Call strategy can enhance overall portfolio stability, reduce downside risk, and offer long-term income potential#.
Therefore, even if performance may lag during significant market rallies, the Covered Call strategy remains a worthwhile investment option, especially for those investors seeking income and effective risk management.
Global X HSCEI Components Covered Call Active ETF (3416) $A GX国指备兑(03416)$
Global X HSI Components Covered Call Active ETF (3419) $A GX恒指备兑(03419)$
For more information, including the fund's prospectus, please visit https://www.globalxetfs.com.hk/campaign/covered-call-etf/
*Positive yield does not mean positive return. Covered call writing can limit the upside potential of the underlying security. Payments of distributions out of capital or effectively out of capital amounts to a return or withdrawal of part of an investor's original investment or from any capital gains attributable to that original investment. Any such distributions may result in an immediate reduction in the Net Asset Value per Share of the Fund and will reduce the capital available for future investment. Fund Inception Date: Feb 28, 2024.
#While Covered call writing limits potential gains of the underlying security, it provides a relatively stable option premium income for investors.
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This document contains the opinions of Mirae Asset Global Investments (Hong Kong) Limited (“MAGIHK”) and is intended for your use only.
It is not a solicitation, offer or recommendation to buy or sell any security or other financial instrument and shall not constitute any form of regulated financial advice, legal, tax or other regulated service. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. MAGIHK makes no representation as to their accuracy or completeness and therefore do not accept any liability for a loss arising from the use of this document.
Investment involves risk. Forecasts, past information and estimates have certain inherent limitations. Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these opinions are suitable for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice.
Past performance information presented is not indicative of future performance. Before making any investment decision, investors should read the fund’s offering document for further details including the risk factors.
Investing in the Covered Call Active ETF may expose to risks (if applicable) including active investment management risk, futures contracts risk, margin requirement risk, failure of clearing house risk, concentration risk, securities lending transaction risks, currency risk, distributions paid out of capital or effectively out of capital risk, and trading risks.
Investors should ensure they fully understand the risks associated with the applicable investment and should also consider their own investment objective and risk tolerance level. Investors are advised to seek independent professional advice if in doubt.
Issuer: Mirae Asset Global Investments (Hong Kong) Limited (Licensed by the Securities and Futures Commission for Types 1, 4 and 9 regulated activities under the Securities and Futures Ordinance). This document has not been reviewed by the Securities and Futures Commission or the applicable regulator in the jurisdiction which this article is posted and no part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of MAGI HK.
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