Korea Investment Management's Three 'ACE Daily Target Covered Call' ETFs Post Over 15% Annual Distribution Rate

Combined Net Asset Value of Three ETFs Surpasses 556.1 Billion Won

Korea Investment Management announced on June 5 that the recent one-year distribution rates for all three of its covered call exchange-traded funds (ETFs) exceeded 15%.

The passive covered call products in the ACE ETF lineup from Korea Investment Management include the ACE US Big Tech 7+ Daily Target Covered Call (Synthetic), ACE US Semiconductor Daily Target Covered Call (Synthetic), and ACE US 500 Daily Target Covered Call (Synthetic) ETFs. On May 19, the distribution rate paid for each product in May was 1.27%, 1.28%, and 1.27%, respectively. The most recent one-year cumulative distribution rates for the three ETFs were 15.09%, 15.02%, and 15.15%, respectively. The cumulative distributions over the past year amounted to 1,823 won, 1,890 won, and 1,591 won, respectively.

All of these covered call ETFs utilize zero-day-to-expiration (0DTE) options. Zero-day-to-expiration options are structured such that options with less than one day until maturity are issued on every trading day, allowing for the collection of premiums on a daily basis. As the strike price changes each day, the cumulative performance of daily options is said to more effectively track the underlying index compared to weekly (one-week maturity) or monthly (one-month maturity) options.

According to Korea Exchange, as of the previous day's closing price, the combined net asset value of the three ACE ETF Daily Target Covered Call ETFs was 556.1 billion won. This represents an increase of more than 28.45% compared to the beginning of the year.

Nam Yongsoo, head of the ETF division at Korea Investment Management, explained, "The three ACE Daily Target Covered Call ETFs are designed by combining dividend income generated from the underlying stocks with the call option premiums accumulated daily as a source of distribution. The underlying assets are based on indices that drive the fundamentals of global stock markets, such as leading large-cap US stocks, key semiconductor companies, and major big tech firms."

He added, "However, the covered call structure may not be advantageous in all market conditions. Investors are advised to consider both their cash flow objectives and the long-term growth potential of their assets, and to diversify through systematic investment in tax-advantaged accounts."

This content was produced with the assistance of AI translation services.