XYLD - XYLD: Attractive High Yielder With An Element Of Defense

2024-06-04 11:55:42 ET

Summary

• The Global X S&P 500 Covered Call ETF is a low-cost ETF that sells options using the S&P 500 index.
• The ETF's objective is to maximize income from covered call strategy, which limits the potential for capturing gains from the price appreciation.
• Yet, given the prevailing macro conditions and uncertainty around interest rates, it seems that sideways trading or a downward sloping market scenario are more realistic.
• In such situations, XYLD should deliver solid relative total returns, while still delivering attractive distribution income.
• In this article I assess XYLD and outline my thoughts on why I think that this ETF is an attractive portfolio diversifier especially for yield-chasing investors.

The Global X S&P 500® Covered Call ETF (XYLD) is a pure play covered call ETF, which sells options using the S&P 500 index. It has a market cap of over $8 billion and the expense ratio is just 0.6%, which is quite low given that XYLD incorporates option strategies....

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