KB Asset Management's 'Weekly Covered Call ETF' Surpasses 100 Billion KRW in Net Assets

KB Asset Management's ‘KBSTAR 200 Weekly Covered Call Box Index Fund (ETF)’ surpassed 100 billion KRW in net assets just over four months after its launch.

KB Asset Management announced on the 1st that it has paid a total distribution of 418 KRW per share over four months. With a monthly distribution rate of 1.01%, the cumulative distribution rate is 4.04%.

In March and April, stock dividends from the KOSPI 200 stock portfolio partially contributed to the distribution funds, resulting in some taxable distributions. However, in May and June, the taxable portion of the distribution was zero, allowing investors to receive distributions tax-free.

The ‘KBSTAR 200 Weekly Covered Call ETF’ is the first covered call exchange-traded fund (ETF) based on domestic stocks that employs a ‘weekly covered call’ strategy by selling call options with maturities of less than one week.

Weekly options, which expire every week, have lower volatility but higher premiums compared to standard monthly options with one-month maturities, enabling higher returns than monthly covered call products.

The tracking index is the ‘KOSPI 200 Weekly Covered Call ATM Index,’ jointly developed by KB Asset Management and the Korea Exchange. Since the index was launched in 2019, the average monthly option premium has been around 3%. Notably, the monthly average option premium has never fallen below 1% since the index's inception.

This product is also advantageous in terms of tax efficiency compared to other covered call ETFs based on overseas assets or investment assets such as time deposits, bonds, and equity-linked securities (ELS).

Dividend income generated from the KOSPI 200 stocks invested in by the ETF (around 0.16% monthly) is taxable, but most of the distribution funds come from stock trading gains and income from selling options, which are derivatives traded on the exchange and excluded from the taxable base price.

Kim Chan-young, Head of the ETF Business Division at KB Asset Management, said, “The ‘KBSTAR 200 Weekly Covered Call ETF’ generates monthly distribution funds of about 1% through dividends from KOSPI 200 stocks and option premiums from the covered call strategy. Since a significant portion of the distribution funds comes from non-taxable option premiums, it will be an even more attractive investment destination for investors seeking tax benefits.”