Demand for Monthly Distributions Grows Amid Volatile Markets... SOL 200 Target Weekly Covered Call ETF Pays 170 Won per Share in September

[Financial News] As domestic stock markets fluctuate without establishing a clear direction, covered-call exchange-traded funds (ETFs) that seek monthly cash flow through option premiums are emerging as an investment alternative.
Shinhan Asset Management said on the 1st that it paid a September monthly distribution of 170 won per share for the SOL 200 Target Weekly Covered Call ETF. Based on the closing price on the 28th of last month, the day before the ex-distribution date, the monthly distribution rate was 1.43%.
The SOL 200 Target Weekly Covered Call ETF invests in the KOSPI 200 Index while selling domestic weekly call options to generate option premium income. It also uses dividend income from KOSPI 200 constituent stocks as a source of distributions.
Since its listing in March, the ETF has continued making monthly distributions for six consecutive months, beginning with its first distribution in April. The initial distribution reflected approximately one and a half months of operating performance after listing, while the distribution rate has remained around 1.4% per month thereafter.
Volatility in domestic stock markets has also increased recently. The KOSPI closed at 7,080.92 on the 23rd of last month, just before the Chuseok holiday. On the 28th, the first trading day after the holiday, it fell 2.70% to close at 6,889.74 as rising U.S. Treasury yields, weakness in large-cap semiconductor stocks and foreign net selling of around 3 trillion won combined to weigh on the market.
The ETF uses a target covered-call strategy, adjusting the proportion of call options sold only as much as necessary to secure the desired level of option premiums. Unlike conventional covered-call strategies, which sell call options on the entire portfolio, this approach leaves room to participate in gains in the underlying assets when the market rises.
From a tax perspective, gains from on-exchange trading of domestic stock index options are not reflected in the ETF's tax basis reference price. Accordingly, distributions paid from such trading gains are not subject to comprehensive taxation on financial income in regular brokerage accounts. However, dividend income tax may be imposed on distributions paid from taxable sources, such as dividends from KOSPI 200 constituent stocks.
Kim Jeong-hyeon, head of Shinhan Asset Management's ETF Business Group, said, "Recently, domestic stock markets have continued to fluctuate without a clear direction due to geopolitical uncertainty, rising U.S. Treasury yields and weakening investor sentiment toward technology stocks. During periods when it is difficult to predict the market's direction, the target covered-call strategy may become more useful as it leaves open the possibility of stock price gains while seeking regular cash flow through option premiums."  

[email protected] Bae Han-geul Reporter