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For investors seeking momentum, Global X S&P 500 Covered Call ETF XYLD is probably on the radar. The fund just hit a 52-week high and is up 13.84% from its 52-week low price of $37.93/share.
But are more gains in store for this ETF? Let’s take a quick look at the fund and the near-term outlook on it to get a better idea of where it might be headed:
XYLD in Focus
The Global X S&P 500 Covered Call ETF follows a “covered call” or “buy-write” strategy, tracking the Cboe S&P 500 BuyWrite Index. The product charges 60 bps in annual fees (See: All Long Short ETFs).
Why the Move?
A covered call is an investment approach designed to produce income and offer some protection against potential declines in value. This strategy entails purchasing a stock or a portfolio of stocks and then selling call options on those holdings. These call options provide the buyer with the right, but not the obligation, to buy the stocks at a set price within a specified timeframe.
The covered-call strategy has been an area to watch lately as market volatility increased following the Fed’s announcement of fewer rate cuts for 2025 than previously expected. The Fed now projects two rate cuts in 2025
More Gains Ahead?
XYLD might continue its strong performance in the near term, with a positive weighted alpha of 10.46 (as per Barchart.com), which gives cues of a further rally.
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