Korea Investment Trust Management announced on the 17th that two types of ACE 15% Premium Distribution Exchange-Traded Funds (ETFs) have secured the first and second highest returns among covered call ETFs listed domestically over the past month.
As of the 14th, there are currently 22 covered call ETFs listed on the Korea Exchange. Among them, the top two performers over the past month were the ACE US Semiconductor 15% Premium Distribution (Synthetic) ETF (14.58%) and the ACE US Big Tech+ 15% Premium Distribution (Synthetic) ETF (13.37%). Additionally, the ACE US 500 15% Premium Distribution (Synthetic) ETF recorded a 5th place return of 2.84%. Thus, all three ACE 15% Premium Distribution ETF series ranked among the top performers.
The ACE 15% Premium Distribution ETF series is a covered call product utilizing zero-day-to-expiration (0DTE) options, first listed domestically by Korea Investment Trust Management in April. Generally, option premiums tend to be higher the longer the expiration period. However, according to Korea Investment Trust Management’s analysis of past data (November 2022 to November 2023), the total premiums collected daily through 0DTE options were higher than those from monthly options during the same period.
Besides 0DTE options, the strategy also employs out-of-the-money (OTM) 1% options that partially track market performance. Through OTM 1% options, the portfolio performance can reflect up to a 1% daily return of the underlying assets in addition to call option premiums. Since all three products target an annual distribution rate of 15%, this is the management strategy chosen by Korea Investment Trust Management to achieve high distribution rates.
The strategy of using 0DTE OTM 1% options has resulted in stable dividend payments to investors. According to Korea Investment Trust Management’s disclosure on the 12th, the June distribution rates of the ACE 15% Premium Distribution ETF series exceeded the monthly target distribution rate (1.25%) calculated by simply dividing the annual target distribution rate of 15%. This means the first month’s distribution since listing surpassed the target.
The distribution rates for each product in June were 1.27% for the ACE US 500 15% Premium Distribution (Synthetic) ETF, 1.36% for the ACE US Semiconductor 15% Premium Distribution (Synthetic) ETF, and 1.37% for the ACE US Big Tech7+ 15% Premium Distribution (Synthetic) ETF. These rates correspond to the top 1 to 3 distribution rates among dividend ETFs listed domestically. Since all three products are monthly dividend ETFs that distribute dividends during the month, the dividends are scheduled to be paid on the 18th.
Nam Yong-su, Head of ETF Management at Korea Investment Trust Management, said, "After much consideration to overcome the limitations of the traditional covered call strategy, which is difficult to track indices, we launched the ACE 15% Premium Distribution ETF series. Thanks to the excellent performance of the three products since listing, there has been steady inflow of funds, mainly from individual investors."
He added, "Considering the structure of covered call ETFs, where losses can occur if the decline in the underlying assets exceeds the option premium, the ACE 15% Premium Distribution ETF series, which includes underlying assets with upward trends (large-cap US companies, US semiconductor companies, US big tech companies), will be a good investment tool."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
