The Korea Exchange announced on the 25th that it will unveil the 'Korea Value-Up Weekly Covered Call 30% Index,' a derivative strategy index investing in the Korea Value-Up Index and KOSPI 200 weekly options. It is set to be announced on the 30th.
A covered call refers to a strategy of holding a specific asset, such as stocks, while simultaneously selling call options for that asset. This strategy has limited upside revenue potential, but it can generate a steady cash flow through the premiums obtained from selling call options. Covered call monthly dividend exchange-traded funds (ETFs) adopt this strategy.
The Korea Value-Up Weekly Covered Call 30% Index secures distributable revenue by weekly selling KOSPI 200 weekly call options twice, generating option premiums based on the gains and losses of the Korea Value-Up Index. Instead, it limits the call option selling ratio to 30%, allowing it to track up to 70% of market uptrends.
The Korea Exchange noted that based on an analysis reflecting the stock market trends over the past five years, the cumulative revenue rate of this index is 31%, with an annual average revenue rate of 5%. The revenue volatility was lower by between 0.7 percentage points and 2.5 percentage points compared to the Korea Value-Up Index.
The Korea Exchange anticipated that if the Korea Value-Up Weekly Covered Call 30% Index is used as the underlying index for financial products such as ETFs, it could meet investor demand for stable distribution revenue along with the rising stock prices of superior domestic corporations.