Domestic covered call strategies finally have investable products

Yesterday, I saw that CMB Wealth Management launched two new indices, which are very distinctive and are covered call strategies. It is expected that related products will be issued in the future.

The so-called covered call strategy, Covered Call, compared to just holding the underlying asset, the covered call strategy can obtain income from selling call options on the tracked underlying in the early stage. When the underlying asset falls or rises slightly, it provides some downside protection when the underlying asset declines. However, you can't have your cake and eat it too. When the underlying asset rises significantly, the upside potential of the covered call strategy is relatively limited.

These strategies are already quite popular in the U.S. stock market, and there are representative products tracking the Nasdaq 100 and S&P 500, such as JEPQ and JEPI.

In the Hong Kong stock market, there are also related ETFs that implement covered call strategies, with relatively good performance, such as those tracking the Hang Seng China Enterprises Index and Hang Seng TECH Index.

The biggest feature of these covered call strategy ETFs is that their drawdowns are relatively lower compared to ordinary tracking indices. In the medium to long term, they behave more like a medium-high volatility fixed-income plus or balanced stock-bond fund.

This type of covered call strategy is actually quite suitable for the current A-share market, because historically, the A-share market has been highly volatile with short bull markets and long bear markets. If index products similar to such covered call strategies are introduced, they will likely improve investors' holding experience, much like dividend indices. This time, CMB Wealth Management's two indices also have a simulated backtest, which shows that they can indeed control some drawdowns.

Looking forward to CMB Wealth Management launching products based on these two indices as soon as possible.

(Not for investment purposes)

$A GX HSICC(03419.HK)  $A GX HSCEICC(03416.HK) 

$JPMorgan Equity Premium Inc ETF(JEPI.US) $JPMorgan Nasdaq Equity Premium Income ETF(JEPQ.US)