COMMENTARY
The S&P 500 closed November as the best month of the year so far with every one of the 11 sectors notching a green month. With the uncertainty of the election and another FOMC (Federal Open Market Committee) meeting in the rear-view mirror, investors went full risk-on and didn’t look back. It probably helped that earnings season wrapped up with companies in the S&P 500 growing an average of 5.8% and more than half of the index members beating estimates. The VIX fell throughout the month from the low-20s back to the low-teens, where it spent much of the year. Looking ahead, seasonal strength may continue into the "Santa Claus" market period, though offsetting factors like tax-loss selling and geopolitical tensions can never be overlooked.
During November, the Amplify CWP Enhanced Dividend Income ETF (DIVO) returned 6.29% while the benchmark, the S&P 500 Index, returned 5.87% and the CBOE S&P 500 BuyWrite Index (BXM) returned 4.00% (see standardized performance). The Financials sector (+11.83%) was the biggest contributor to returns followed Consumer Staples (+9.69%) and Industrials (+10.58%).1 Information Technology (+6.49%) contributed the least to the return due to an underweight relative to the benchmark followed by Consumer Discretionary (+8.44%). Positions that contributed most significantly included Goldman Sachs (GS) Honeywell (HON) and JPMorgan Chase (JPM), while Apple (AAPL) and Amgen (AMGN) were among the biggest detractors.
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. For performance data current to the most recent month-end please visit DIVOETF.com.
No new positions were added to the Fund during the month. During November, American Express (AXP) and CME Group (CME) were added to while JPMorgan (JPM) was also added to after being partially called away earlier in the month. From a sector perspective, the Fund maintained an overweight to Financials and underweight to Information Technology, as many of the companies in that sector don’t meet the criteria to be included in the Fund.
From an options standpoint new calls were sold during the month on Apple (AAPL), Duke (DUK), Goldman Sachs (GS), JPMorgan (JPM), Visa (V) and Walmart (WMT) while one existing call option was rolled into December and several expired.
The portfolio held a total of one covered call2 at the end of November 2024: Apple (AAPL).
At the end of the month, approximately 3.9% of the portfolio was covered.
YIELD
| Distribution Frequency: Monthly |
Distribution Rate: 4.80% |
30-Day SEC Yield: 1.65% |
Why ROC May Benefit ETFs Using Option Writing Strategies
The return of capital (ROC) can play a beneficial role in ETFs that utilize option writing strategies to generate income. Option premiums received from selling a call (or put) are typically classified as a capital gain to the fund. Unlike interest or dividends, capital gains can be offset with losses. For tax purposes, this can allow the ETF to distribute option premiums as a non-taxable distribution, commonly called ROC. ROC reduces the investor's cost basis, deferring the capital gains tax owed upon selling shares. Option premiums can also provide a measure of downside risk mitigation in volatile market conditions with the option premium received helping offset a decline in portfolio holdings and improving risk-adjusted returns. Option writing strategies offer an attractive after-tax, risk adjusted return for investors seeking income. ROC is 59% as of 11/30/24.
PERFORMANCE
Fund inception date: 12/14/2016. DIVO’s gross expense ratio is 0.56%. The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. Short-term performance, in particular, is not a good indication of the fund’s future performance, and an investment should not be made based solely on returns. For performance data current to the most recent month-end please visit AmplifyETFs.com/DIVO. Brokerage commissions will reduce returns. A fund’s NAV is the sum of all its assets less any liabilities, divided by the number of shares outstanding. The closing price or market price is the most recent price at which the fund was traded.
Distribution Rate is computed as the normalized current distribution (annualized) over NAV per share. Distributions have been classified as a return of capital and may be comprised of option premiums, dividends, capital gains, and interest payments. There is no guarantee the ETF will pay a distribution. Click here for Form 19(a)-1 information. 30-Day SEC Yield is a standard yield calculation developed by the Securities and Exchange Commission that allows for fairer comparisons among bond funds. It is based on the most recent month end. This figure reflects the income earned from dividends – excluding option income – during the period after deducting the Fund’s expenses for the period.
SECTORS
| Sector | % Weight |
TOP 10 HOLDINGS
| Ticker | Name | % Weight |
All data as of 11/30/2024. Subject to change at any time. Fund holdings should not be considered recommendations to buy or sell any security. View Current Complete Holdings.
Index Definitions: All indexes are unmanaged and it’s not possible to invest directly in an index. S&P 500 Total Return Index—market-capitalization-weighted index of the 500 largest U.S. publicly traded companies by market value, and assumes distributions are reinvested back into the index. It does not include fees or expenses. CBOE S&P 500 BuyWrite Index (BXM)—tracks the performance of a hypothetical buy-write strategy on the S&P 500 Index. A “buy-write” strategy is generally one in which an investor buys a stock (or basket of stocks), and also writes covered calls that correspond to those holdings. CBOE Volatility Index (VIX) is a measure of implied volatility, based on the prices of a basket of S&P 500 Index options with 30 days to expiration. DIVO differs substantially from the S&P 500 Index and CBOE S&P 500 BuyWrite index, which are used for comparison purposes as widely recognized measures of U.S. stock market performance. While the returns of DIVO have exhibited positive (but varying) correlation to the indexes over time, DIVO may invest in different stocks and in different proportions than in the S&P 500 index and CBOE S&P 500 BuyWrite index.
1All percentages shown indicate total return of the sector for the month.
2A covered call refers to a financial transaction in which the investor selling call options owns an equivalent amount of the underlying security.