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RYLD: Covered Call Small-Cap Equity ETF With 12.5% Yield

Published Fri, 25 Sep 2020 09:53:41 -0400 on Seeking Alpha

Seeking AlphaETF AnalysisRYLD: Covered Call Small-Cap Equity ETF With 12.5% YieldSep. 25, 2020 9:53 AM ET|| About: Global X Funds - Global X Russell 2000 Covered Call ETF (RYLD)by: Juan de la HozJuan de la Hoz CEF/ETF Income LaboratoryCEF/ETF income and arbitrage strategies, 8%+ portfolio yieldsSummaryCovered call funds provide investors with strong yields but lower capital gains, a good tradeoff for most retirees and income investors.
RYLD is a covered call ETF investing in the small-cap Russell 2000 index.
The fund's strong 12.5% dividend yield and focus on the hard-hit small-cap equity subsector make it a buy.
The Global X Russell 2000 Covered Call ETF (RYLD) is an index ETF that invests in the small-cap Russell 2000 index and sells covered calls on its holdings. The fund's strong 12.5% dividend yield, defensive options strategy, comparatively low level of risk and volatility, and outperformance during flat markets make it a strong investment opportunity for income investors and retirees, albeit one without the possibility of substantial capital gains.
Investors could consider complimenting RYLD with other ETFs or funds following a covered call options strategy to diversify their holdings and minimize losses during downturns. The Global X S&P 500 Covered Call ETF (XYLD) yielding 5.8% and the Global X Nasdaq 100 Covered Call ETF (QYLD) yielding 12.1% are two such funds previously covered here and here.
RYLD Basics
Sponsor: Global X Underlying Index: Cboe Russell 2000 BuyWrite Index Dividend Yield: 12.5% Expense Ratio: 0.60% AUM: $18.9M RYLD Overview
RYLD is an index ETF that invests in the Vanguard Russell 2000 ETF (VTWO) and sells one-month at-the-money call options on the same index. It is a small fund with only $18.9 million in AUM, so there is a real risk of the fund shutting down in the coming months or years, although this wouldn't result in any shareholder losses, as the fund is an ETF and always trades at NAV.
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