In a slow bull market, covered call products appear quite attractive on the surface, as investors can receive monthly interest.
I have a neighbor I've known for many years. One day, when I was returning home for dinner, I ran into him in the elevator, and he stopped me to chat. He said he had HKD 500,000 invested entirely in GlobalX's covered call (3416.HK), and he could receive over HKD 7,000 in interest each month. This return is actually not difficult to calculate; the annualized return he mentioned is about over 10%, which translates to roughly 1% to a little over 1% per month, so receiving over HKD 7,000 on HKD 500,000 each month is reasonable.
However, it is important to note that in a slow bull market, while interest can be collected, the investment performance actually lags behind the market. Specifically, the performance of these covered call ETFs will underperform the actual index ETFs.
If the market is in a sideways state, investors can collect interest each month while the underlying stock price remains basically unchanged; but if it enters a slow bear market or a declining market, the situation becomes &#34;earning interest but losing value.&#34; Investors should not mistakenly believe that covered calls can provide significant protection in a declining market; in fact, they can only partially offset losses and cannot completely eliminate them.
Therefore, do not think that as long as you receive over 10% in interest, a decline in stock price is inconsequential. What is considered &#34;inconsequential&#34; actually depends on personal definition. For example, if you originally expected over 10% in interest returns, but 3416.HK simultaneously dropped by over 10%, you might feel like you broke even. However, from a practical perspective, your total return is actually zero, which is a typical case of &#34;earning interest but losing value.&#34;
In summary, there are three market conditions: rising, flat (sideways), and falling. Whether you invest in 3416.HK or Southern's covered call (2802.HK), you are essentially betting on market trends—you are betting that the market will remain stable or rise slightly. At the same time, you accept a premise: even if the market rises, you are satisfied with the interest received, and missing out on some of the gains is not a concern.
As for a viewer's question about whether it is possible to reinvest the dividends from 3416.HK back into 3416.HK, there is no problem with that. However, doing so will only increase your investment cost, equivalent to increasing your betting amount. Whether you invest in 2802.HK or reinvest the interest received, the difference is minimal; the key is that your principal amount continues to grow.
I must emphasize one point: covered calls are not a risk-free hedging tool. They are not a product that offers &#34;risk-free but over 10% returns.&#34; If that were the case, the market would already be flooded with products offering over 10% returns. Since they can provide over 10% in returns, they naturally come with corresponding risks.
The risks of these products mainly include two aspects. First, there is the loss of opportunity cost—if the market rises, your returns will be limited by the covered call strategy. Second, there is the risk of decline—when the market falls, the ETF will still decline, and the interest may only partially offset the losses, at best breaking even, but cannot fully cover the decline. Once the market drops sharply, covered calls cannot withstand the entire downturn
For example, if the national index rises from about 8,700 points to over 9,300 points, the increase is about 7% to 8%; however, the covered national index ETF only rose by about 4%, which clearly underperformed the market. With the national index increasing by 7% to 8% and the ETF only rising by 4%, it naturally falls into the category of underperformance

QDCC

FNCL

In a slow bull market, covered call options seem attractive, allowing investors to receive monthly interest. However, investment performance often lags behind the market, especially in sideways or slow bear markets, where "earning interest while losing value" may occur. Investors need to be cautious and cannot rely solely on interest returns, as a decline in stock prices may lead to a total return of zero. Market trends are categorized into rising, sideways, and falling, and investors must understand the risks and accept potential losses

- In a slow bull market, covered call options appear attractive, allowing investors to earn monthly interest, though performance may lag behind the index.  
- While investors can receive monthly earnings, if the market shifts to a decline, the interest income may not sufficiently offset losses, leading to a situation of "earning interest while losing value."  
- Ultimately, the covered call strategy involves risks, including opportunity costs and exposure to market declines, and it does not guarantee risk-free returns.

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