At a glance
- More than half of financial advisors — 52.9% — report using covered call derivative income strategies to generate durable yield in client portfolios, according to the same webcast.
- Granat gave the supply side: of more than 1,000 ETF launches over the past year, over 50% incorporated derivatives.
- Granat described the fund's design as deliberately avoiding deep at-the-money options, which cap upside in the pursuit of double-digit yields.
Fidelity Investments' FYEE ETF posted a trailing 12-month annualized yield of 9.1%, above the 6% to 8% payout it targets, according to Fidelity portfolio manager and derivatives analyst Eric Granat. He discussed the fund on a TMX VettaFi webcast.
More than half of financial advisors — 52.9% — report using covered call derivative income strategies to generate durable yield in client portfolios, according to the same webcast.
Granat gave the supply side: of more than 1,000 ETF launches over the past year, over 50% incorporated derivatives.
Granat described the fund's design as deliberately avoiding deep at-the-money options, which cap upside in the pursuit of double-digit yields.
Morningstar's covered call category averages roughly a 6.75% annual distribution yield, below FYEE's trailing figure, according to the webcast.
Granat said the fund trades Section 1256 cash-settled S&P 500 index options, which are generally subject to 60% long-term and 40% short-term capital gains treatment regardless of holding period. The portfolio generally executes options trades weekly, sometimes multiple times per week, tied to market conditions, exposure and trade execution.
FYEE's 9.1% trailing yield runs past its own 6–8% payout target
Trailing 12-month annualized distribution yield vs. target and category average
Show as table
| Label | Value (%) |
|---|---|
| FYEE trailing 12-month yield | 9.1% |
| FYEE target payout (midpoint of 6–8%) | 7% |
| Covered call category average | 6.75% |
Upside capture and limits
Since inception, Granat said, FYEE has maintained an equity beta of roughly 0.79 and captured approximately 80% to 85% of the S&P 500's cumulative return, alongside roughly 15% lower annualized volatility.
Granat said covered call strategies should not be viewed as a substitute for downside protection: the options overlay can reduce volatility, but it does not eliminate losses in a market decline.
Reported by the Active desk from ETF Trends. Published . Corrections