Korean covered call ETF assets reached 26.7655 trillion won as of the 9th, an increase of over 11 trillion won from the beginning of the year (15.1087 trillion won), as investors sought downside protection amid volatile domestic stock market conditions. The capital inflows occurred despite KOSPI falling over 10% during this period, while NASDAQ and S&P 500 indices rose only around 1%. Covered call ETFs allow investors to generate premium income by selling call options on underlying stocks or indices, providing partial return protection during sideways or moderately declining markets through distributed premiums.
Covered Call ETF Assets Grow 11 Trillion Won Since Year Start
According to the financial investment industry on the 12th, the combined total net assets of domestic covered call ETFs stood at 26.7655 trillion won as of the 9th, an increase of over 11 trillion won compared to the beginning of the year (15.1087 trillion won). The assets grew by nearly 1 trillion won even compared to one month prior (25.5062 trillion won). During this period, KOSPI fell by more than 10%, while NASDAQ and S&P 500 indices rose only around 1%.
Individual Investors Purchase TIGER and KODEX Covered Call Products
As market volatility increased, individual investors actively purchased domestic equity covered call ETFs. According to ETF Check, individuals bought 532.8 billion won worth of TIGER Dividend Covered Call Active (9th in net purchases), and also purchased significant amounts of TIGER Semiconductor TOP10 Covered Call Active (181.1 billion won) and KODEX 200 Target Weekly Covered Call (157.6 billion won).
Asset Managers Launch Active Covered Call ETF Products
Asset management companies have recently launched a series of covered call active products to overcome the structural limitations of covered call ETFs. Starting with Mirae Asset Asset Management's launch of TIGER Semiconductor TOP10 Covered Call Active in May, three covered call active ETFs were released last month alone. Samsung Asset Management's KODEX 200 Covered Call Active and KB Asset Management's RISE KOSDAQ Covered Call Active are also scheduled for launch.
TIGER Semiconductor Covered Call Active Outperforms Passive Version
Recently, covered call active ETFs have shown better performance compared to products tracking the same index during market declines. TIGER Semiconductor TOP10 Covered Call Active fell 2.5% over the recent month, while the passive product TIGER Semiconductor TOP10 with the same structure declined 10.46%.
Lee Sang-hyun, researcher at Meritz Securities, stated, "In the highly volatile domestic market, covered call active products are generating both expectations of alpha creation through relatively free inclusion and exclusion of constituent stocks, and distribution increases due to rising call option sale premiums, which can serve as an alternative for investors with deep concerns about slowing upward momentum."
FAQ
What are covered call ETFs and how do they work?
Covered call ETFs purchase stocks or indices in advance and then sell call options (the right to buy at a predetermined price) on those assets. When stock prices move sideways or decline moderately, the premiums obtained from selling options are distributed to investors, providing partial return protection.
How much have Korean covered call ETF assets grown this year?
Domestic covered call ETF total net assets reached 26.7655 trillion won as of the 9th, an increase of over 11 trillion won compared to the beginning of the year (15.1087 trillion won), and grew by nearly 1 trillion won compared to one month prior (25.5062 trillion won).
Which covered call ETF products did individual investors purchase most?
Individual investors bought 532.8 billion won worth of TIGER Dividend Covered Call Active (9th in net purchases), 181.1 billion won of TIGER Semiconductor TOP10 Covered Call Active, and 157.6 billion won of KODEX 200 Target Weekly Covered Call.
