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XYLD: S&P 500 Covered Call ETF - 6.76% Yield

Published Sun, 13 Sep 2020 11:17:39 -0400 on Seeking Alpha

Seeking AlphaETF AnalysisXYLD: S&P 500 Covered Call ETF - 6.76% YieldSep. 13, 2020 11:17 AM ET|| About: Global X S&P 500 Covered Call ETF (XYLD)by: Juan de la HozJuan de la Hoz CEF/ETF Income LaboratoryCEF/ETF income and arbitrage strategies, 8%+ portfolio yieldsSummaryXYLD invests in securities from the S&P 500 index, and sells OTM covered calls on the entirety of its holdings.
The fund's investment and options strategy ensure a strong 6.76% dividend yield with the potential for small capital gains.XYLD could be a strong investment opportunity for retirees or income investors.
XYLD could be a strong investment opportunity for retirees or income investors.
Due to subscriber and reader interest, I've decided to take a look at the Global X S&P 500 Covered Call ETF (XYLD).
XYLD invests in the S&P 500 index, and sells covered calls on the entirety of its holdings. The fund basically trades most of the upside of said index for an increased 6.76% dividend yield, and might make sense for retirees or income investors who prefer the certainty and stability of dividends over more unreliable, if perhaps stronger, capital gains.
Although XYLD is a good fund, both the Nuveen S&P 500 Buy-Write Income Fund (BXMX) and the Nuveen S&P 500 Dynamic Overwrite Fund (SPXX) are comparable choices with more attractive discounts, and so are probably stronger investment opportunities, at least at current prices.
Fund Basics
Sponsor: Global X Underlying Index: Hybrid CBOE S&P 500® 2% OTMBuyWrite Index Expense Ratio: 0.65% Dividend Yield: 6.76% Total Returns CAGR (Inception): 6.98% Fund Overview
XYLD invests in the S&P 500 index, and sells one-month 2% out-of-the-money call options, maturing on the 21st of each month, on the entirety of its holdings for an increased 6.76% dividend yield. In simple terms, these options means that price upside potential is capped at about 2% per month (really per options interval), that downside potential... Read more