Listen to this article (1:49):
Investors face many challenges in the current market, such as global uncertainty and market volatility. But, according to Veronika Popova, Director of ETF Strategy at Global Asset Management1, volatility is a normal and healthy part of the investment process. In some cases, volatility can present new opportunities for investors.
One such opportunity is a covered call strategy. A covered call is a financial strategy that can generate income while lowering downside risk and providing attractive returns. It can also offer targeted exposure to a particular sector, such as utilities. Utilities, which include basic services like electricity, gas, and water, are considered essential services needed to survive. As a result, the demand for utilities and utility services tends to be inelastic, making them an attractive and income-generating option.
A covered call ETF strategy that targets utilities and utility services comes with several benefits, including convenience, income, downside protection, and tax efficiency. Investing in CI Utilities Giants Covered Call ETF (CUTL) provides additional benefits, thanks to the defensive nature of utilities and their reliable and income-generating potential. CUTL invests in an equally weighted portfolio of 20 or more of the largest utilities companies listed on a North American stock exchange with a covered-call option overlay. Call options are written on up to approximately 25% of the underlying portfolio, leaving the vast majority of the portfolio uncovered, allowing investors to capitalize on the appreciation of the underlying securities in the portfolio.
In a volatile environment, covered call strategies offer a compelling solution by providing targeted exposure, tax-efficient income, and downside protection. Veronika Popova suggests that investors should consider whether a covered call utilities strategy is right for them. Investing in CI Utilities Giants Covered Call ETF (CUTL) can be an attractive option for those looking to benefit from sustained periods of market volatility.
Need CE Credits? Upcoming CI Global Asset Management's Live Events and CE financial webinars, here.
Footnotes:
1 Adapted from source: "Benefits of a Covered Call Utilities Strategy | CI Global Asset Management." CI Global Asset Management, 3 Mar. 2023, www.cifinancial.com/ci-gam/ca/en/expert-insights/articles/benefits-of-a-covered-call-utilities-strategy.html.
