Nasdaq-100 covered call ETF with daily options: HANetf lists QQQI on the LSE

The HAN Nasdaq 100 Daily Covered Call UCITS ETF – Distributing sells daily-expiry call options on the Nasdaq-100 index. TER of 0.59 per cent, monthly distributions.

This is a Nasdaq-100 covered call ETF that utilises daily-expiry options.

The aim is to generate income through the systematic sale of very short-term call options, whilst seeking to retain a greater share of the index’s potential upside than that offered by traditional monthly-expiry covered call strategies. The TER is 0.59% per annum.

According to HANetf, it is the first covered call ETF in Europe featuring daily option expiries.

How a covered call ETF works

A covered call strategy combines two elements: exposure to an asset, in this case the Nasdaq-100 index, and the sale of call options on that same asset.

The option seller receives a premium but forgoes any gains exceeding the strike price until the option expires. The premium received represents the main source of income distributed to investors, alongside dividends from the companies in the portfolio.

In Europe, the most common versions of this strategy use options with monthly expiry dates. The HANetf ETF applies the same logic, but with options that expire daily.

Daily options in the HANetf strategy

HANetf identifies three elements that distinguish the daily expiry approach from the monthly or quarterly ones.

Income. According to the issuer, the systematic sale of call options with very short expiry dates – generally one day – enables the strategy to aim to capture option premiums repeatedly and consistently.

Upside exposure. Options with more frequent expiry dates and adaptive strike prices, set further out-of-the-money, would allow the strategy to forgo a smaller portion of the Nasdaq-100’s potential upside when the calls are exercised, compared to traditional covered calls.

Timing risk. The strike price is set adaptively in line with implied volatility. The daily reset aims to reduce the risk of being locked into a call with a longer maturity when the index rises. According to HANetf, this can mitigate some of the timing constraints typical of monthly and quarterly strategies.

The issuer describes the approach as adaptive and rule-based.

The benchmark index: Nasdaq-100 Daily Covered Call Index

The ETF tracks the Nasdaq-100 Daily Covered Call Index (ticker NDXDCC), calculated by Nasdaq. The index measures the performance of a systematic covered call strategy, which aims to generate income by periodically selling a bullish position via call options on the Nasdaq-100 index, typically with a one-day expiry.

The underlying index is the Nasdaq-100, which comprises the leading non-financial companies listed on the Nasdaq, with a significant weighting in the technology sector.

Hector McNeil, Co-Founder and Co-CEO of HANetf, commented: “We are delighted to launch the Nasdaq-100 Daily Covered Call UCITS ETF, which expands the options available to investors seeking to combine equity exposure with an options-based income strategy. This is the first product of its kind with daily option expiries. Investing in covered call strategies involves balancing the premium received against the growth potential foregone. This ETF addresses this balance through very short-term options and strike prices that systematically adapt to market volatility. As investors scrutinise the workings of various options-based income strategies more closely, we believe there is value in offering a clear, rules-based approach. This launch adds a further way to gain exposure to the Nasdaq-100 via the UCITS ETF structure, with a distinctive approach to managing the trade-off between income and upside participation.

Monthly distributions and currency

The ETF distributes income on a monthly basis. According to HANetf, the fund can offer income-oriented investors the potential for regular distributions, seeking to capture the volatility risk premium through an options-based strategy.

The amount of the distributions is not fixed. It depends on the premiums received, which vary with the implied volatility of the Nasdaq-100, and on the index’s dividends.

The denomination currency is the US dollar. For an investor holding euros, the return on investment also depends on the performance of the euro/dollar exchange rate.

What to consider before investing

Covered call strategies have characteristics that investors need to be aware of:

Limited upside. When the index rises above the strike price, gains above that level go to the option buyer. The ETF aims to reduce this loss, but does not eliminate it.

Exposure to falling markets. The premium received only partially offsets losses should the index fall.

Variable distributions. Income depends on market conditions and is not guaranteed.

Concentration. The Nasdaq-100 has a high concentration in specific sectors and in large-cap stocks.

Currency risk for investors holding euros.

Conclusions

With the HAN Nasdaq 100 Daily Covered Call UCITS ETF – Distributing, HANetf is bringing a covered call ETF on the Nasdaq-100 to the European market, which sells options with daily expiry. The fund is now tradable on the London Stock Exchange.

The product is aimed at investors seeking a monthly income from exposure to the Nasdaq-100 and who accept the typical limitations of options strategies.