5 Benefits Of Covered Call ETF’s

  • High yield

    Compared to other types of ETF, the Covered Call ETF tend to have a great yield. This is especially true for Covered Call ETFs that focus on high dividend paying stocks.

    benefitsCovered Call ETFs normally have a higher fee than standard ETFs, but for many Covered Called ETFs the increased return more than compensates for this.

  • Diversification

    Both the Covered Call ETF and the standard ETF offers the possibility of high diversification. You gain exposure to a wide range of underlyings. You can for instance elect to invest in a Covered Call ETF based on all the stocks included in the S&P 500 Index.

  • Passive income

    You don’t have to do the day to day or even month to month trading. It is all taken care of by the fund managers. If you wanted to mimic the diversification offered by a Covered Call ETF by doing your own trades and issue your own options, you would have to be a very active trader.

    Of course, this feature is not unique to the Covered Call ETF or even to ETFs in general; it is more a feature shared by actively managed funds in general. You are paying fund managers a fee to manage your investment. (An alternative for those seeking as passive income are the funds that aren’t actively managed; they tend to have much lower fees and you still don’t have to do any job except picking the fund.)

  • Long term

    Most ETFs are designed to be appealing to long term investors rather than day traders and similar. If long term is what your after, this is a big plus.

  • Preferential tax treatment

    In many jurisdictions, gains from dividends are taxed lower than most other capital gains, and in some of these jurisdictions, this low tax will apply to your gains from ETFs. Always check up applicable tax law before making any decision.