Global X Taps Into Sector-Focused, Covered Call ETFs

November 22, 2022

Global X Management Co., which manages $41 billion in exchange-traded funds, is launching a trio of ETFs that seek to tap demand for investments in specific industries. 

The three funds—the Financials Covered Call & Growth ETF (FYLG), the Health Care Covered Call & Growth ETF (HYLG) and the Information Technology Covered Call & Growth ETF (TYLG)—will track the financials, health care and information technology sectors of the S&P 500, respectively, Global X said in a statement

The launch comes amid a rise in sector investing options that allow for investors to diversify their portfolios while navigating market volatility. Sector-focused investments offer exposure to stocks and equities of companies in specific subdivisions and can help investors pursue profit without high risks. Assets under management among State Street Global Advisors' SPDR suite of sector-focused funds rose to $237.4 billion at present from $137 billion in 2017.

“The financials, health care and IT sectors are well-positioned to benefit from a range of long-term structural and technological shifts,” Global X’s Vice President of Research Rohan Reddy wrote in an email to ETF.com. Advances in “disruptive fintech,” telemedicine, digital health solutions and IT security are among areas eyed for growth, he wrote. 

The newly launched ETFs buy stocks in a particular industry sector and write corresponding call options. The options are about half of the value of the securities in the reference index. For example, FYLG follows a covered call strategy that focuses on 50% of the Financial Select Sector SPDR Fund (XLF) 

Reddy said the strategy permits investors to retain upside potential within their investments while using the ETF structure for liquidity purposes.  

“[The ETFs] allow investors to receive income and mitigate downside risk without sacrificing all of the sectors’ upside potential,” he noted. 

All three ETFs—FYLG, HYLG, and TYLG—come with expense ratios of 0.60% and list on the NYSE Arca. They join the New York-based firm’s growing lineup of ETFs, which now has 100 under its umbrella. 

Global X is a unit of Seoul, South Korea-based Mirae Asset Global Investments.  

 

Contact Zoya Mirza at [email protected] 

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