Volatility boosts demand for monthly distributions ... SOL covered-call ETF pays 140 won per share in October

[Financial News] Amid continued sharp swings in the domestic stock market, a covered-call exchange-traded fund (ETF) based on KOSPI 200 that seeks to make monthly distributions paid 140 won per share as its October distribution. The strategy is said to be gaining traction in volatile markets because it earns option premiums while leaving room to participate in market gains.
Shinhan Asset Management said on the 2nd that it had paid a monthly distribution of 140 won per share for October on the Shinhan SOL 200 Target Weekly Covered Call ETF. The monthly distribution yield was 1.37%, based on the closing price on the 28th of last month. Since its listing last March, the ETF has maintained a monthly distribution yield of around 1.3% to 1.4%, beginning with its first distribution in April.
The product invests in KOSPI 200 constituent stocks while selling domestic weekly call options to earn option premiums. It also uses dividend income generated by KOSPI 200 constituents as a source of monthly distributions.
Unlike conventional covered-call strategies, it adjusts the proportion of options sold only to the level needed to secure the target premium. The proportion varies according to market volatility and option prices, and the portion not covered by sold options is designed to participate in gains in the underlying assets.
Kim Jeong-hyeon, head of Shinhan Asset Management’s ETF Business Group, said, “Volatility in the domestic stock market has increased sharply recently, as debate over the profitability of AI investments, uncertainty about the U.S. interest rate path, and fluctuations in foreign investor flows have converged. When it is difficult to gauge the index’s direction, strategies that leave room for gains while seeking regular cash flow through option premiums may become more useful.”
Shinhan Asset Management is also set to list the SOL 200 Covered Call Active ETF on the 10th. It will use an active strategy that increases the weighting of leading stocks among KOSPI 200 constituents based on factors such as earnings, valuation, and supply-and-demand dynamics.
The new product will pay distributions in the middle of each month, while the existing Shinhan SOL 200 Target Weekly Covered Call ETF pays them at the beginning of the month. The two products are structured so that investors can receive distributions twice a month if they use both.
[email protected] Bae Han-geul Reporter