Shinhan Asset Management Launches New SOL US 30-Year Treasury Covered Call ETF

Shinhan Asset Management announced on the 27th that it will newly list the ‘SOL US 30-Year Treasury Covered Call (Synthetic) ETF’.

The ‘SOL US 30-Year Treasury Covered Call ETF’ is a product that invests in long-term US bonds using a covered call strategy to receive stable monthly dividends. The covered call strategy involves buying the underlying asset while simultaneously selling a call option that grants the right to buy the underlying asset at a specific price. By utilizing the covered call strategy, losses are buffered by the option premium when the underlying asset declines. However, when the underlying asset rises, the returns are capped at a certain level.

Junghyun Kim, Head of the ETF Business Division at Shinhan Asset Management, said, “Bonds, which have an inverse correlation with interest rates, maximize the effectiveness of covered call strategy investments when interest rate direction is uncertain and volatility increases with sideways movement.” He added, “Although expectations for a US interest rate cut were formed through the recent Federal Open Market Committee (FOMC) meeting, forecasts about the starting point vary. Investors anticipating a box-range sideways market should consider the ‘SOL US 30-Year Treasury Covered Call ETF,’ while those expecting a clear downward trend in interest rates should consider the forward-direction investment ‘SOL US 30-Year Treasury Active (H) ETF.’”

The ‘SOL US 30-Year Treasury Covered Call ETF’ plans to pay monthly distributions to investors starting from February 2024, consisting of coupon interest from the underlying 30-year US Treasury bonds plus monthly call option premiums. Although fluctuations may occur depending on the price trend of the underlying asset, a monthly dividend yield of around 1% and an annual yield of around 10% are expected.

Another advantage is that 100% of the accumulated funds in retirement pension (DC/IRP) accounts can be invested. When trading through ISA (brokerage type), personal pension, or retirement pension (DC/IRP) accounts, taxation such as dividend income tax is deferred until withdrawal. In particular, personal pensions offer tax credit benefits up to 6 million KRW, and combined contributions with IRP up to 9 million KRW, making this product optimized for pension account investments.

Kim added, “Since the SOL US 30-Year Treasury Covered Call focuses more on dividends as a monthly dividend ETF, it is expected to enrich investors’ monthly dividend portfolios and create synergy alongside existing products like SOL US S&P 500 and SOL US Dividend Dow Jones.”