Q: I have another question on these covered call style funds. If the underlying stock rises and the 'at the money' option is exercised and the stock is sold, do the funds have to rebuy equivalent stock?
Or is part of the risk profile that they may be paying out some of the increase in NAV as monthly dividends and the NAV will then decrease over time (or at least the # of shares will decrease).
Or is part of the risk profile that they may be paying out some of the increase in NAV as monthly dividends and the NAV will then decrease over time (or at least the # of shares will decrease).
5i Research Answer:
UMAX writes options on 50% of its portfolio, so typically it will re-buy the stock and sell more...