In this engaging discussion, Jonathan Shelon, COO of KraneShares, highlights the rise of covered call strategies in today’s unpredictable markets. He explains how KLIP, an ETF focused on Chinese internet stocks, manages to generate monthly yields of 3-5%. Shelon emphasizes the benefits of diversifying with Chinese equities, which have appealing valuations compared to U.S. markets. He also explores the vital differences in market cycles between the U.S. and China, offering insights for investors looking to optimize income through international assets.
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insights INSIGHT
Covered Calls Defined
A covered call strategy involves owning a stock and selling call options to generate income by capping upside potential.
It's effective in volatile or range-bound markets to enhance returns through option premiums.
insights INSIGHT
Surging Demand for Covered Calls
Covered call ETFs have surged, especially post-2020, as investors seek income amid market uncertainty.
The strategy gained popularity due to inflation concerns and distrust in bonds, driving demand for alternative yield sources.
insights INSIGHT
Changing Fortunes of International Investing
The past decade favored US stocks, but the prior 12 years saw emerging markets outperform significantly.
Currency shifts and changing economic cycles suggest international diversification may regain its value.
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Are you struggling to find meaningful yield in today's unpredictable markets? You're not alone. The investment landscape is evolving rapidly, pushing savvy investors toward innovative solutions that combine income potential with strategic diversification.
In this enlightening conversation with Jonathan Shelon, Chief Operating Officer at KraneShares, we dive deep into the explosive growth of covered call strategies and why international markets offer a particularly compelling opportunity. Shelon reveals how KLIP, KraneShares' international covered call ETF focused on Chinese internet stocks, generates monthly income in the impressive 3-5% range – substantially higher than what most U.S.-based covered call products offer.
What makes this strategy especially powerful is its diversification benefit. With a correlation of just 0.4 between U.S. and Chinese markets, these assets move on completely different cycles, creating a portfolio cushion when you need it most. As Shelon explains, "When US markets experience stress or drawdowns, it happens at a completely different time than when China experiences market stress."
We explore the compelling valuation case for Chinese equities, with tech companies trading at PE ratios in the mid-teens while maintaining strong growth. This stands in stark contrast to U.S. markets trading near historic highs both in index levels and valuations. Most investors remain significantly underweight China at just 2-3% exposure, despite KraneShares recommending 5-10% allocation.
Whether you're seeking to enhance your income strategy, reduce portfolio volatility, or strategically position for a potential shift in global market leadership, this conversation offers practical insights you won't want to miss. Ready to transform your approach to income and international diversification?
Visit kraneshares.com to learn more about KLIP and other innovative investment solutions designed for today's challenging market environment.
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