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GAMCO Global Gold, Natural Resources & Income Trust: 13% Yield And A Favorable Backdrop

Published Fri, 12 Jul 2019 06:45:00 -0400 on Seeking Alpha

Produced by The Belgian Dentist for The Income Strategist

(Source: Hedgeye)
In December, we stated that the backdrop for investing in the GAMCO Global Gold, Natural Resources & Income Trust (GGN) had improved considerably.
Exhibit 1: GAMCO Global Gold, Natural Resources & Income Trust

(Source: CEFConnect)
Thanks to rising gold and energy stocks. the fund performed well in the past months. What is the current outlook for GGN?
Buy-write strategy
A "Buy-Write" strategy, also known as covered calls, is generally considered to be an investment strategy in which an investor buys a stock or a basket of stocks, and also writes covered call options that correspond to the stock or basket of stocks.
Buy-Write strategies provide option premium income that can help cushion downside moves in an equity portfolio, but Buy-Writes often traditional long investing in stocks in rising markets. Investors are willing to accept lower highs for higher lows.
Exhibit 2: Covered Call

Historically, this strategy has trailed the S&P 500 in double-digit return markets, but has outperformed in lower-return or negative markets.
Exhibit 3: Buy-Write strategy vs. S&P 500 Index

Exhibit 4: Buy-Write strategy outperformance

GAMCO Global Gold, Natural Resources & Income Trust
The GAMCO Global Gold, Natural Resources & Income Trust is an income fund. It intends to generate current income from short-term... Read more