Retail investors in Korea shifted capital toward high-dividend and covered call exchange-traded funds (ETFs) as the domestic stock market experienced sharp daily swings entering July. The move reflects a preference for downside protection and stable monthly distributions over short-term capital gains amid heightened volatility. Covered call ETFs use option premium income from call writing to buffer losses and generate regular payouts, a strategy that becomes more lucrative when market swings widen. Last week alone, four major dividend and covered call ETFs attracted over 301 billion won in net inflows, signaling broad retail demand for defensive income-generating products. The trend coincides with a six-month surge in covered call ETF assets under management, which climbed from approximately 15 trillion won early this year to over 26 trillion won recently — an increase exceeding 11 trillion won in half a year.
Covered Call ETF Assets Surge 11 Trillion Won in Six Months
According to the Korean financial investment industry on May 28, total assets under management for domestic covered call ETFs reached over 26 trillion won, up from around 15 trillion won at the start of this year. The 11-trillion-won jump in roughly six months reflects growing awareness of the covered call strategy, which collects larger option premiums during periods of high volatility, and strong retail demand for stable monthly income. Short-term inflow momentum also accelerated: data from KOSCOM ETF CHECK showed that the four major dividend and covered call ETF products drew a combined 301 billion won over five trading days last week.
Four Major Dividend ETFs Draw 301 Billion Won Last Week
TIGER Dividend Covered Call Active received 105.2 billion won in net inflows last week, while the recently listed KODEX 200 Covered Call Active attracted 95 billion won, serving as short-term safe havens during the market downturn. In terms of trading value, TIGER US Dividend Dow Jones recorded an average daily turnover of 31.4 billion won over the recent week (July 20–27), followed by PLUS High Dividend Stocks (21 billion won) and TIGER Banking High Dividend Plus TOP10 (16 billion won). Assets under management also expanded rapidly: Mirae Asset Global Investments' TIGER US Nasdaq 100 Target Daily Covered Call surpassed 2.2 trillion won in AUM, becoming the first domestic-listed overseas covered call ETF to exceed the 2-trillion-won threshold. On the performance front, KB Asset Management's RISE 200 High Dividend Covered Call ATM posted a 25.85% return over the most recent one-month period, demonstrating defensive strength during the sharp sell-off.
KB and Samsung Launch New Covered Call Products on May 28
KB Asset Management listed RISE KOSDAQ Covered Call Active on May 28, marking Korea's first covered call ETF based on the KOSDAQ 150 index. The fund actively invests in core KOSDAQ growth stocks such as semiconductors and biotechnology, while selling weekly call options to target an annual premium of around 15% and provide monthly distributions. On the same day, Samsung Active Asset Management introduced KoAct High Dividend Active, which selects 50 quality dividend-paying stocks from the KOSPI 200 High Dividend index to secure downside rigidity.
Tax Exemptions on Option Premiums and Stock Gains Attract Long-Term Investors
Industry experts cite tax advantages as a key driver of capital flows into covered call ETFs. Under current Korean tax law, domestic option premium income and domestic stock trading gains are tax-exempt, offering highly favorable after-tax returns. Investors can also reduce their financial income comprehensive taxation burden and access these products through pension savings and retirement pension (DC/IRP) accounts, attracting long-term-oriented retail participants. An asset management industry official stated, "In a situation where second-half interest rate direction and global macro uncertainties persist, covered call ETFs combining the strength of underlying assets with premium income will remain the most powerful alternative in the stock market for the time being," adding, "However, since upside potential may be capped during sharp rallies, investors should carefully examine their risk profile and the volatility of the underlying assets before selecting a product."
FAQ
What are covered call ETFs and why did Korean retail investors increase allocations entering July?
Covered call ETFs hold a portfolio of stocks and simultaneously sell call options on those holdings to collect premium income. Korean retail investors increased allocations to these products entering July because the domestic stock market exhibited sharp daily swings, prompting a shift from short-term capital gains strategies to defensive instruments offering downside protection and stable monthly distributions. The covered call strategy generates higher option premiums during periods of elevated volatility, making it attractive in turbulent market conditions.
How much capital flowed into dividend and covered call ETFs last week?
Last week, four major dividend and covered call ETF products attracted a combined 301 billion won in net inflows over five trading days, according to KOSCOM ETF CHECK data reported on May 28. TIGER Dividend Covered Call Active received 105.2 billion won, and the recently listed KODEX 200 Covered Call Active drew 95 billion won.
What tax benefits apply to covered call ETF investments in Korea?
Under current Korean tax law, domestic option premium income and domestic stock trading gains generated by covered call ETFs are tax-exempt, providing favorable after-tax returns. Investors can also reduce their financial income comprehensive taxation burden and access these products through pension savings and retirement pension (DC/IRP) accounts, which appeal to long-term savers seeking to lock in funds with tax advantages.
