Samsung Asset, KODEX US S&P 500 Daily Covered Call OTM ETF Listed

Samsung Asset Management announced on the 7th that it will list the ‘KODEX US S&P500 Daily Covered Call OTM ETF,’ which invests in the US S&P500 while utilizing daily call option selling to accumulate option premiums daily and distribute them monthly.

KODEX US S&P500 Daily Covered Call OTM invests in the US S&P500 index and simultaneously pursues a 100% covered call strategy using daily out-of-the-money (OTM) options to seek a certain level of capital gains along with high premium income. It was created in collaboration between Samsung Asset Management and S&P. Along with the KODEX US Nasdaq100 Daily Covered Call OTM, which was listed in October last year, it is an ETF that executes real-time daily option trading without time lag.

The ‘S&P500 Covered Call 1% OTM Daily Index,’ which KODEX US S&P500 Daily Covered Call OTM tracks, has had an average annual premium income of about 33% over the past five years. Even in 2019, when premiums were at their lowest, it recorded around 9%. As a monthly dividend product, the option premium level varies each month, so the maximum distribution rate is capped at about 15% annually (1.25% monthly). Premiums exceeding this are reinvested to pursue compound growth. The monthly distribution rate is the highest compared to existing domestic monthly dividend S&P500 ETFs.

Since the strike price of the call option, which allows the counterparty to buy the stock, is set at a 1% increase from the S&P500 index on the same day, investors can gain both capital gains of up to about 1% daily and option premiums simultaneously.

For the S&P500 index, from 2010 to August 2024, about 86.6% of days saw daily index changes of less than 1% up or down, while 13.4% of days saw increases of 1% or more, indicating a high effectiveness of the 1% OTM investment. In fact, from August 2016 to August 2024, the S&P500 index and the underlying index of this product, the S&P500 Covered Call 1% OTM index, moved almost identically. This means investors can expect performance very similar to investing in the general S&P500 index while receiving monthly distributions.

For domestic ETFs using US option trading, time differences with the US market have caused restrictions on real-time trading, leading to strike prices being calculated based on the previous day’s underlying index and call option selling executed the next day or managed through synthetic operation methods. KODEX US S&P500 Daily Covered Call OTM has the advantage of improving trading accuracy and reducing operating costs by having Samsung Asset Management’s New York local office calculate strike prices based on the same day’s underlying index and conduct real option trading locally in the US.

Im Taehyuk, Executive Director of ETF Operations at Samsung Asset Management, explained, "Major US investment banks (IBs) forecast the S&P500 index to rise 10-20% this year based on the US’s robust economy and earnings growth. However, some expect that the inauguration of a second Trump administration, interest rate policy volatility, and valuations higher than historical averages may act as burdens."

He added, "For investors expecting a speed adjustment, KODEX US S&P500 Daily Covered Call OTM will be a good investment tool that allows participation in daily price increases of about 1% in the S&P500 index while managing volatility through monthly dividend receipts of up to 15% annually."