Are These Global X ETFs Better Than QYLD?

Global X ETFs are among the old guard when it comes to option-strategy ETFs. Their SPY and QQQ option-strategy ETFs, the Global X S&P 500 Covered Call ETF (XYLD) and Global X NASDAQ 100 Covered Call ETF (QYLD), both launched in 2013.    

Over the last three years, a number of new ETFs employing covered calls on the S&P 500 and the Nasdaq-100 have been launched. My fund database includes 18 QQQ-based ETFs, of which 15 have come to market in the last three years.

The two Global X covered call ETFs sell at-the-money call options, which really caps their upside return potential.

Of the 13 QQQ funds with at least one-year returns, QYLD ranks second-worst, earning a total return of 24.5%. For comparison, four of the ETFs returned more than 40% over that time period.

The folks at Global X seem to realize that their two legacy ETFs are greatly underperforming the newer generation of peers. So, in February, Global X launched two new ETFs covering the S&P 500 and the Nasdaq 100. The new funds are:

●   Global X US 500 Income Edge ETF (EDGX)

●   Global X Nasdaq-100 Income Edge ETF (EDGQ)

The information about each fund on the Global X website promises that these two new ETFs will pay weekly dividends, compared with the monthly payments of the older ETFs. And, instead of going for the maximum covered call yield that you’d get from selling at-the-money calls, the new ETFs have target distributions: EDGX has a target distribution of 9%, while EDGQ targets a 13% payout rate.

These targeted distributions should allow the two new ETFs to participate more in the upside gains of the underlying indexes. EDGX and EDGQ are very new, but so far they are nicely outperforming their siblings.

It’s of interest that QYLD and XYLD have $11.5 billion in assets. Will the new ETFs cannibalize the older ones, or bring in new assets to Global X?