What is a covered call strategy?

Covered call strategies pair a long position with a short call option on the same security. The combination of the two positions can often result in higher returns and lower volatility than the underlying index itself.

Can a covered call strategy pull profits from an investment?

Leveraged covered call strategies can be used to pull profits from an investment if two conditions are met: The level of implied volatility priced into the call options must be sufficient to account for potential losses. The returns of the underlying covered call strategy must be higher than the cost of borrowed capital.

How does CI GAM's covered call strategy work?

CI GAM’s covered call strategies write monthly at-the-money call options on 25% of the ETF, which generally consists of an equal weight of companies targeting a sector or segment of the market. This time-tested process allows the strategy to generate attractive income while being exposed to the majority of upside potential.

Can a covered call premium reduce a negative return?

For example, in a flat or falling market the receipt of the covered call premium can reduce the effect of a negative return or even make it positive. And when the market is rising, the returns of the covered call strategy will typically lag behind those of the underlying index but will still be positive.