Hanwha Asset Management said on the 18th that it newly listed the "PLUS China Hang Seng Tech Weekly Target Covered Call" exchange-traded fund (ETF).
The PLUS China Hang Seng Tech Weekly Target Covered Call ETF invests in the Hang Seng Tech Index, the "China Nasdaq," which includes 30 leading Chinese innovation growth stocks. To target a distribution of 15% a year (1.25% a month), it uses a covered call strategy that keeps the call option selling ratio at about 20%. It participates in about 80% of index gains.
Previously, options on the Hang Seng Tech Index existed only on a monthly basis. Since September last year, weekly options have been introduced, allowing a higher participation rate in gains even with a relatively lower option weight. Generally, weekly options are less likely to be exercised than monthly options.
Hanwha Asset Management cited a "higher premium versus major U.S. market indexes" as the ETF's differentiator. In a "covered call strategy," the premium, or the value of a call option (the right to buy a stock at a specific price), rises as stock price swings become more pronounced. Simply put, the Hang Seng Tech Index is relatively more volatile than major U.S. indexes such as the S&P 500 and Nasdaq 100, meaning sellers of call options can expect a higher premium.
The top 10 constituents by weight in the Hang Seng Tech Index include Alibaba, SMIC, Tencent, NetEase, Inc., Meituan, BYD, Xiaomi, JD.com, Inc., Kuaishou, and Baidu.
Kim Jeong-seop, head of the ETF Business Division at Hanwha Asset Management, said, "As the technology gap between the United States and China is narrowing rapidly over leadership in artificial intelligence (AI), we recommend allocating a portion of portfolios to the Chinese market," adding, "This ETF invests in China's innovation corporations and, by using weekly call option selling premiums as a source, can be expected to generate stable monthly cash flows."