Investors on the hunt for regular income have this year poured almost $26bn into exchange traded funds that sell options tied to stocks, inspiring a wave of copycats and raising questions about their effects on market volatility.
The funds, known as covered call ETFs, have surged in popularity to contain roughly $59bn in combined assets, up from only $3bn three years ago, according to Morningstar Direct. The number of ETFs in the category has nearly tripled in that time to about 60 in the US.
“The zeitgeist of the retail ETF investor has moved on to income-based products and options-based products,” said Dave Mazza, chief strategy officer at Roundhill Investments, which plans to launch three covered call ETFs in the near future after dropping a strategy focused on meme stocks.