Amplify has launched a new ETF that seeks to balance capital appreciation with robust income generation by investing in US growth-oriented stocks while opportunistically writing covered calls.
Christian Magoon, CEO of Amplify ETFs.
The Amplify CWP Growth & Income ETF (QDVO US) has been listed on NYSE Arca with an expense ratio of 0.55%.
QDVO joins the $3.4 billion Amplify CWP Enhanced Dividend Income ETF (DIVO US) and $140 million Amplify CWP International Enhanced Dividend Income ETF (IDVO US) as part of Amplify’s growing ‘Enhanced Income’ suite.
Both of the existing funds invest in concentrated portfolios of dividend-paying equities while seeking to boost income through covered call overlays – DIVO focuses on US-listed equities while IDVO invests in American Depository Receipts.
Similar to DIVO and IDVO, QDVO is sub-advised by Florida-based investment advisor Capital Wealth Planning.
The fund holds between 20-40 large-cap, growth-oriented US equities from within the Russell 1000 Growth Index. Security selection favours dividend-paying companies with quality attributes related to earnings, cash flow, return on equity, market capitalization, and management track record.
The portfolio is constructed to capitalize on growth opportunities while maintaining diversification across sectors and individual stocks.
Additionally, the fund utilizes an opportunistic covered call-writing program in a bid to lower overall risk and enhance total return.
A covered call is an income-producing strategy where an investor sells call options against shares of stock already owned. The investor collects the option premium as income but is exposed to losses on the contract if the underlying stock’s price rises above the call option’s strike price. As such the investor will not realize gains on the stock position above the strike price.
Covered call options within the portfolio may be written on individual stocks or against broad market US equity indices.
QDVO targets an annual income rate between 6% – 8% through a combination of dividends (up to 2%) and option call premiums (4-6%).
Christian Magoon, CEO of Amplify ETFs, commented: “QDVO is an exciting addition to the Amplify lineup and partnership with Capital Wealth Planning. QDVO is designed to capture investors’ enduring appetite for growth while providing high monthly income potential, empowering them to optimize their portfolios in various market environments. It represents a timely strategy for those looking to balance their growth with income generation.”