Monthly Covered Call Commentary: May 2025

The Global X Research Team is pleased to announce the release of its Monthly Covered Call Report, featuring the premium and distribution values attained by its roster of covered call funds in April of 2025. The key takeaways below, as well as those highlighted within the report, recap some of the most pivotal undertakings to have taken place across the markets during the April roll period. They outline their influence over the option pricing environment and help substantiate changing investor sentiments as characterized by specific market indicators.

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May 2025 Covered Call Report – Key Takeaways

• For the better part of 2025, investors have been actively weighing the potential impact of US import tariffs on equities and the global economy. It incited a relatively consistent downtrend for the S&P 500 from late February through early April. However, the sharpest portion of the drawdown took place in the immediate aftermath of “Liberation Day”, when tariffs officially went into effect. At that time, the bond market recognized one of its most pronounced reversals in recent memory, with the 10-year and 30-year treasury instruments experiencing increases in yield of 36 bps and 37 bps, respectively, from April 2^nd to April 11^th.¹ The reaction may have influenced a 90-day pause on tariffs to many of the United States’ trade partners. However, it also likely contributed to the S&P 500 falling to a 52-week low on April 8^th, at 4,982.²
• Taking recessionary concerns into consideration, fueled by uncertainty regarding tariff implications on employment and inflation, the Cboe Volatility Index (VIX) eclipsed the 52 level on April 8^th, marking the highest such peak established since the COVID-19 pandemic.³ The index was not alone, however, as volatility was felt across most asset classes including treasuries, commodities, and foreign currency. And despite the S&P 500 rebounding by about 6% from the April 8^th trough through the end of the roll period on April 17^th, the VIX was still sitting in the 30 vicinity at that time, illustrating the potential for additional volatility in the month ahead.⁴
• Although it still remains to be seen what impact tariffs might have on employment and the Consumer Price Index (CPI) within the United States, progress on trade negotiations and a 90-day pause on tariffs against certain nations has given investors some semblance of a reprieve. Should deals be made with key trade partners and the U.S. economy be able to weather the impact of tariffs in a healthy fashion, the markets may be able to continue making strides back toward the all-time highs at which they traded to start the year. Recently receiving some of their most generous premiums in the last two years, Global X’s Covered Call & Growth funds may be able to continue receiving premiums while still participating in a portion of the market’s upside price movements.

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Originally Posted on May 8, 2025 – Monthly Covered Call Commentary: May 2025

Footnotes

1. Bloomberg L.P. Retrieved April 28^th, 2025
2. Bloomberg L.P. Retrieved April 28^th, 2025.
3. Bloomberg L.P. Retrieved April 28^th, 2025.
4. Bloomberg L.P. Retrieved April 28^th, 2025.