Mirae Asset's 3 TIGER target daily covered call ETFs draw over W1tr from retail investors this year

Mirae Asset Global Investments said Wednesday that retail investors have poured more than 1 trillion won ($744 million) into its three US benchmark index-based target daily covered call ETFs so far this year.

According to Korea Exchange data, cumulative net purchases by retail investors in the TIGER US NASDAQ 100 Target Daily Covered Call, TIGER US S&P 500 Target Daily Covered Call and TIGER US Dividend Dow Jones Target Daily Covered Call ETFs totaled 1.098 trillion won as of Tuesday. The combined net assets of the three products stand at 3.59 trillion won.

The TIGER US NASDAQ 100 Target Daily Covered Call ETF led the three with retail net purchases of 828.6 billion won. The TIGER US S&P 500 Target Daily Covered Call and TIGER US Dividend Dow Jones Target Daily Covered Call ETFs drew 149.5 billion won and 120 billion won, respectively.

Covered call ETFs hold underlying assets while selling call options, using the premiums collected as a source of distributions. Because distributions reduce net assets, investors should look beyond the distribution rate and also consider the long-term growth potential of the underlying asset and total return.

A traditional covered call strategy sells options covering the entire stock holding to secure premiums. However, it has limitations: when share prices rise sharply, the fund struggles to fully capture the upside, and when volatility falls, option premiums shrink as well.

The target covered call strategy addresses these drawbacks by adjusting the proportion of options sold to meet a target distribution rate. The three TIGER US target daily covered call ETFs sell only about 10 percent of daily-expiry options, allowing them to capture roughly 90 percent of the underlying index's gains while still collecting option premiums for distributions.

The S&P 500 and US Dividend Dow Jones products use a mid-month distribution record date, while the NASDAQ 100 product uses an end-of-month date. Investors who hold all three can receive distributions twice a month — once mid-month and once at month-end.

Lee Jeong-hwan, head of the strategic ETF management division at Mirae Asset Global Investments, said the long-term growth potential of the underlying asset is critical for covered call ETFs. "We designed these products around the three major US indexes suited for long-term pension investment, combining them with a target daily covered call strategy so investors can pursue both growth and cash flow," he said. He added that by pairing the mid-month and end-of-month distribution record dates, investors can receive distributions twice a month, offering practical help in managing their cash flow.