The Global X Russell 2000 Covered Call ETF (RYLD) and its investment strategy are the subjects of this article. The author had previously expressed bearish sentiment towards RYLD, asserting that its structure hinders its ability to generate alpha. This sentiment was supported by the fact that RYLD has underperformed the S&P 500 and the Global X NASDAQ 100 Covered Call ETF (QYLD) by approximately 15% and 8% respectively. However, recent developments in the technology stock space and a struggling S&P 500 have made the Russell 2000 index more appealing. As a result, increased volatility in the market has allowed RYLD to outperform QYLD in the past three months. It is important to note, however, that there are two significant caveats to consider: the divergent dynamics between the VIX and RVX, and RYLD’s negative alpha compared to the VTWO total return performance. Despite recent improvements, the author still deems RYLD a subpar investment choice with a notable opportunity cost.

RYLD’s Underperformance

Over the past period, RYLD has underperformed both the S&P 500 and the Global X NASDAQ 100 Covered Call ETF (QYLD) by approximately 15% and 8% respectively. This underperformance has raised concerns among investors and has reinforced the previous bearish sentiment towards RYLD.

Recent Moves in the Technology Stock Space

Recent moves in the technology stock space have made the Russell 2000 index more attractive. The struggling S&P 500 has led investors to seek opportunities in smaller cap stocks, which are well-represented in the Russell 2000 index. This shift in focus has had a positive impact on RYLD’s performance, as it is primarily invested in these smaller-cap stocks.

 

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