Investment Q&A

These are single stock covered call funds. They own the underlying company shares, and sells call options and/or put options to enhance yield. Current yields are high, but many have still performed poorly. We do not have any particular issues with the set up. Some investors are not comfortable with options, and if they are willing to pay a fee on an ETF to enhance yield then that is their choice. But, in addition to the fees, many of the ETFs are fairly small and the options only protect part of the downside risk of the stock. In a market correction, these funds are still going to get hit hard, and an investor looking for income could see a large loss instead. Many investors may not understand the risks, and are only looking at the high yield. This, of course, is the problem here, but not really in the product itself. Upside potential can be capped by the call options as well.  we would rather own the underlying stocks directly.