MADISON, Wis. – Members Mutual Funds, a joint venture between CUNA Mutual’s MEMBERS Capital Advisors and Madison Investment Advisors, announced the launch of a new fund yesterday, an equity income fund that will own common stocks and sell call options on the majority of these stocks thereby "covering" the stock.
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The fund seeks a high level of option income and gains for quarterly distributions, reduced volatility through a risk-managed hedging strategy and partial protection in declining markets.
Call options give the buyer the right to purchase the stock at a certain price (strike price) on a future date. This effectively sets a target sales price of the stock and is similar to pre-selling the stock at a higher price.
