HYGW ETF

The iShares High Yield Corporate Bond Buywrite Strategy ETF writes covered calls on the HYG ETF to generate high distributions. The fund's strategy results in capped upside and uncapped downside, causing it to underperform the underlying HYG ETF over the long term. Given the monthly rolling of HYGW's covered calls and current low credit spreads, HYGW is likely to see capital losses as the economy weakens in the coming years.

HYGW offers a strong 13.3% distribution yield by investing in high-yield corporate bonds and writing covered calls. The fund's strategy works best when high-yield rates are flat or increasing, worst when these decrease. At current rates and spreads, I do not foresee any significant decrease in high-yield rates moving forward.

HYGW invests in high-yield corporate bonds and sells covered calls. Doing so leads to a massive 16.7% yield, but long-term capital losses and distribution cuts. An overview of the fund follows.

iShares High Yield Corporate Bond Buywrite Strategy ETF is one of a trio of BlackRock fixed-income buy-write or covered call ETFs. The fund holds a position in the iShares iBoxx $ High Yield Corporate Bond ETF and sells monthly at-the-money call options on it. Getting to grips with the fund's yield takes a bit of work, but, overall, it could easily improve on the 8.6% yield of its underlying holding.