Shinhan Asset Management Pays August Distribution for 'SOL 200 Target Weekly Covered Call ETF'

Amid the current phase of increased volatility in the Korean stock market, target covered call Exchange Traded Funds (ETFs) that generate stable monthly cash flows are attracting the attention of investors by expanding their monthly distributions.

On September 1, Shinhan Asset Management announced that it paid 168 won per share as the August monthly distribution for the 'SOL 200 Target Weekly Covered Call' ETF. This amount represents an increase of 18 won compared to the previous month, and the monthly distribution rate based on the closing price on the day prior to the ex-dividend date (August 27) was 1.39%.

The SOL 200 Target Weekly Covered Call ETF utilizes the KOSPI 200 Index as its underlying asset and aims for monthly distributions based on both option premiums and dividend income. While investing in the KOSPI 200, it pursues a target covered call strategy by selling domestic weekly call options on a weekly basis to earn option premiums. Additionally, dividend income generated from KOSPI 200 constituent stocks is added to secure extra distribution resources. Unlike a conventional covered call strategy, which sells call options against the entire portfolio, the target covered call strategy flexibly adjusts the ratio of options sold, only to the extent necessary to secure the target premium. As a result, it offers a higher level of market participation compared to ordinary covered call strategies when the underlying asset rises. The main advantage is that it seeks to provide regular monthly distributions while reducing the likelihood of underperformance in a rising market.

Kim Junghyun, Head of the ETF Business Group at Shinhan Asset Management, stated, "Recently, although the KOSPI has been attempting a rebound following a sharp correction, the index faces the prospect of continued large fluctuations in the near term due to the high concentration in semiconductors, uncertainty in interest rate direction, increasing geopolitical uncertainty, and changes in foreign investor inflows. In such times, when it's difficult to predict market direction, the target covered call strategy becomes more effective as it allows for the potential of price appreciation while pursuing regular cash flows through option premiums."

Under the current tax code, capital gains from listed options based on domestic stock indexes are not included in the calculation of the taxable standard price for ETFs. Accordingly, when investing through a regular account, the tax burden on distributions can be lower compared to covered call ETFs based on overseas assets, and distributions derived from such option trading profits are not included in the comprehensive financial income taxation base. However, distributions made from taxable sources such as dividend income from KOSPI 200 constituent stocks may be subject to dividend income tax.

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