US high quality, large-cap stocks provide capital appreciation and income potential. In addition, covered call strategies pair a long position with a short-call option on the same stock. It can provide additional income from option premium and reduce exposure to equity market volatility.
From January 2000 through September 2014, a covered-call index has outperformed the S&P 500 Index, and has done so with significantly lower volatility as measured by annualised standard deviation (11.5% vs. 15.4%)4.
2. Source: Allianz Global Investors, as of 31 October 2014.
3. Source: BofA Merrill Lynch, FactSet, quarterly data from January 1988 to September 2014. Based on BofA Merrill Lynch All US Convertibles Index.
4. Source: Bloomberg, Factset, Allianz Global Investors. Based on CBOE S&P 500 Buy/Write Index (BXM) Index. Cumulative and incremental total returns, monthly data from January 2000 to September 2014.