Investment Objective
The Closed-End Covered Call Trust seeks to provide high current income and the potential for capital appreciation.
PRINCIPAL INVESTMENT STRATEGY
Under normal circumstances, the trust will invest at least 80% of the value of its assets in common stocks of closed-end investment companies (“Closed-End Funds”) that are considered to be covered call funds and/or income funds. The Closed-End Funds may contain portfolios that are concentrated in high-yield bonds. Claymore, through proprietary research, will strive to select Closed-End Funds featuring the potential for current income, diversification and overall liquidity.
What is a Covered Call Writing Strategy?
Call options are contracts representing the right to purchase a common stock at a specified price, known as the “strike price,” at a specified future date, known as the “expiration date,” in exchange for an option premium.
The underlying Closed-End Funds held within the Closed-End Covered Call Trust’s portfolio employ an option strategy of writing/selling covered call options on the majority of the common stocks held within the underlying Closed-End Funds. Covered call option writing is designed to produce income from option premiums and offset a portion of a market decline in the underlying common stock. In short, a covered call strategy may provide limited downside protection of the “covered” stock in exchange for some of the upside appreciation potential.