CVRD Profile
The Madison Covered Call ETF is designed to provide investors with a combination of income and capital appreciation by utilizing a covered call strategy. The fund aims to achieve its investment objectives by investing primarily in common stocks of dividend-paying equity securities. Additionally, the fund engages in writing covered call options on a significant portion of its equity portfolio. This strategy is intended to generate income from option premiums while providing potential capital gains from the underlying stocks.
Under normal market conditions, the fund commits at least 80% of its net assets, including any borrowings for investment purposes, to equity securities. These securities typically consist of dividend-paying stocks from established companies, which the fund manager selects based on their income potential and growth prospects. The covered call strategy involves selling call options on these stocks, which allows the fund to collect option premiums as a source of additional income.
The fund’s approach seeks to provide investors with a dual benefit: enhanced income through option premiums and potential appreciation from the underlying equity holdings. By writing covered calls, the fund aims to limit potential upside in exchange for generating consistent income from premiums, which can help cushion the impact of market volatility. This strategy is particularly attractive in a range-bound or moderately bullish market environment.
Madison’s active management of the covered call strategy involves selecting appropriate stocks and determining the optimal strike prices for the call options. The fund’s management team continuously monitors market conditions and adjusts the strategy as needed to align with changing market dynamics. This active approach seeks to balance the trade-off between income generation and capital appreciation, providing investors with a disciplined and income-focused investment solution.
|
