Summary
Attractive risk-return ratioThe importance of risk management has soared in recent years due to increased volatility on the financial markets. Derivative financial instruments remain the primary tools for hedging risks. One of the most widely used options strategies is the covered call, also known as the buy-write strategy. A covered call investment strategy combines a passive index investment with an options position – an options strategy offering higher returns with reduced risk. The entire DAX® index is thus purchased while a call option is simultaneously sold. The premium from the sale of the option provides a risk buffer as against a pure DAX® investment.Deutsche Börse tracks this well-known and very successful investment strategy with the DAXplus® Covered Call Index. The rolling index is based on a DAX® portfolio and a call option on the DAX®, which trades on Eurex.The advantages: In contrast to the potential loss of capital involved with investment in pure call options, profit is generated with the DAXplus® Covered Call Index even in rising markets. Moreover, the union of short call and index minimizes losses in falling markets and actually delivers a return in sideways markets.
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