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Global X Gold Producer Equity Covered Call ETF (GLCC $47.32)
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Hamilton Gold Producer YIELD MAXIMIZER TM ETF (AMAX $31.00)
Q: Hello
Asked this question earlier but did not see a reply.
Just wondering if, in a rising gold price environment, would a covered call ETF benefit from increased call option premium income? And, if so, would this offset the increased risk of missing capital appreciation as a result of the underlying security being called away?
Brad
Asked this question earlier but did not see a reply.
Just wondering if, in a rising gold price environment, would a covered call ETF benefit from increased call option premium income? And, if so, would this offset the increased risk of missing capital appreciation as a result of the underlying security being called away?
Brad
5i Research Answer:
Options premiums generally move more with volatility vs price. However, in a sector rally, premium prices do tend to increase a bit because investors get optimistic. So, in a sector rally, it is possible that income would rise (nothing dramatic, but it depends). However, in such a scenario there would still be capital gains 'missed'. The higher income would not likely be enough to replace the gains that would have been made in a pure equity strategy.