Pursuing Yield and Capital Growth with Derivative Income Instruments

Thursday 07 November 2024

Investment Talks

Pursuing Yield and Capital Growth with Derivative Income Instruments

November 2024 | One popular method for creating potential income while maintaining the potential for capital appreciation is the structuring of a "buy-write" equity-linked note (ELN). This is a bullish options program equivalent to buying an index or stock (long position) while simultaneously selling a call option on that same index or stock. Due to their unique combination of providing equity upside potential while also supplying income, derivative income strategies such as equity-linked notes have become popular vehicles for investors.

01 | Investors can aim to create income while maintaining the potential for capital appreciation through a "buy-write" strategy, an options program that is the equivalent of buying an index or stock (long position) while simultaneously selling a call option on that index or stock.

02 | Morningstar created the "derivative income" category for these types of strategies, and Bloomberg reports the popular category attracted $22 billion in new inflows during 2023.

03 | Amundi US's process is differentiated by a focus on single stock options, which can potentially deliver additional incremental yield and more consistent income than an index-based approach.

Pursuing Yield and Capital Growth w/Derivative Instruments

Important Information

Unless otherwise stated, all information contained in this document is from Amundi Asset Management as of October 2024. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product or service. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not indicative of future results. Amundi US is the US business of Amundi Asset Management.

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©2024 Amundi Asset Management

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