Nuveen S&P 500 Buy-Write Income Fund (BXMX) Stock

BXMX is a buy-write CEF that underperforms in bull markets but buffers downside in bear markets with high option premiums. The fund's structural features limit upside participation to 2% monthly, making it less suitable for violent equity rallies. BXMX trades at a -9% discount to NAV, with a countercyclical premium/discount feature influenced by market regimes.

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The discount on the Nuveen S&P 500 Buy-Write Income Fund (BXMX) has significantly increased, making it a more attractive investment option. BXMX is a call-writing fund that writes calls against the S&P 500 Index with a target of 100% overwrite. Thanks to this strategy, the fund provides investors with a quarterly distribution rate of approximately 7.5%.

The Nuveen S&P 500 Buy-Write Income Fund utilizes options to decrease volatility and boost income from its collection of worldwide stocks, predominantly large-cap stocks, with calls written on the entire equity portfolio. We explain why now is an opportune moment to transition to this fund if you currently hold XYLD, a widely used covered call ETF.

Nuveen S&P 500 Buy-Write Income Fund focuses on generating income through covered calls, offering a distribution yield of 7.2%. Covered call funds have gained popularity for their ability to generate income in all market conditions. Virtually all of this fund's total returns come from distributions and there is no dividend growth so it will only suit certain investors.

BXMX and XYLD write covered calls on the index as an offset to their equity holdings. BXMX is a closed end fund, whereas XYLD is an exchange traded fund. We review them on key characteristics, performance, and yield and provide our pick between the two.

The Nuveen S&P 500 Buy-Write Income Fund writes index call options to enhance risk-adjusted returns and fund an attractive distribution yield. The fund has delivered solid historical performance with average annual returns of 10.0%/6.9%/7.5%/6.8% over 3/5/10/15 years, sufficient to fund its 7.3% distribution. However, investing in BXMX may lead to long-term underperformance compared to passive market funds like the SPY ETF.

The Nuveen S&P 500 Buy-Write Income Fund is currently trading at an attractive discount, dropping from the premium when we last covered the fund. The fund aims to mirror the S&P 500 Index and generates options premium, with a nearly 100% overwrite. BXMX has seen its distribution change many times in its history, but the latest payout seems to be at a reasonable level where it could be maintained for now.