QYLD: What To Expect Once Equity Markets Recover


  • QYLD has outperformed its index YTD, due to its strong, fully-covered 13.3% dividend yield.
  • QYLD should underperform once equity markets recover.
  • An explanation and analysis of the above follow.
  • This idea was discussed in more depth with members of my private investing community, CEF/ETF Income Laboratory. Learn More »

New York during the COVID-19 emergency.

Massimo Giachetti

Author's note: This article was released to CEF/ETF Income Laboratory members on September 24th.

The Global X NASDAQ 100 Covered Call ETF (NASDAQ:QYLD) is a Nasdaq 100 covered call ETF.

Covered call funds are extremely popular investments

QYLD Performance YTD

Seeking Alpha - Chart by Author

Option Profits

Investopedia - Chart by Author

QYLD Capital Losses

Seeking Alpha - Chart by author

Data by YCharts
Covered call funds have limited upside potential, while downside potential remains unchanged. As stocks periodically go down, these funds should see consistent, long-term capital losses. Losses shouldn't be too severe, stocks mostly don't go down, but there should still be losses. QYLD has gone down since inception, as expected, although there were some index changes in prior years which make this information not terribly material.
Data by YCharts
Covered call funds should also see declining dividends when stock prices go down, as option premiums are somewhat dependent on asset values / share prices.

Data by YCharts
QYLD's dividends have closely tracked the fund's share price, consistent with the explanation above. The relationship is very tight due to the aforementioned distribution cap, but the relationship would still exist without said cap, albeit with much greater volatility.

QYLD's share price is down since inception too, and so are the fund's dividends, as expected. On the other hand, dividend volatility and index changes make it impossible to easily / accurately analyses the situation. Still, both are down since inception, as expected.
Data by YCharts

Data by YCharts

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This article was written by

Juan de la Hoz profile picture
CEF/ETF income and arbitrage strategies, 8%+ portfolio yields

Juan has previously worked as a fixed income trader, financial analyst, operations analyst, and economics professor in Canada and Colombia. He has hands-on experience analyzing, trading, and negotiating fixed-income securities, including bonds, money markets, and interbank trade financing, across markets and currencies. He focuses on dividend, bond, and income funds, with a strong focus on ETFs, and enjoys researching strategies for income investors to increase their returns while lowering risk.


I provide my work regularly to CEF/ETF Income Laboratory with articles that have an exclusivity period, this is noted in such articles. CEF/ETF Income Laboratory is a Marketplace Service provided by Stanford Chemist, right here on Seeking Alpha.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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