How are covered call funds faring in a low volatility environment?

Managers have said the low volatility seen in financial markets is not restricting their ability to boost yields by writing call options, despite lower strike prices.

Despite a small uptick last week, amid concern over the stability of Portugal’s largest listed bank, market volatility remains near pre-crisis lows. The VIX index, measuring implied volatility over the next 30 days, dropped to a five-year low last month. This has an impact on funds which seek to boost income by selling call options on their underlying stocks (receiving an upfront payment in return for sacrificing upside above the option strike price). Lower volatility leads to less severe price swings, meaning the price at which managers can sell options has fallen in recent months. ...