Shinhan Asset Management's SOL Palantir covered-call ETF series. [Provided by Shinhan Asset Management]
Shinhan Asset Management's SOL Palantir covered-call ETF series. [Provided by Shinhan Asset Management]

Two covered-call ETFs from Shinhan Asset Management that invest in Palantir Technologies and target monthly distributions are drawing fresh attention after the US AI software company reported second-quarter earnings that beat market expectations.

According to Shinhan Asset Management on Friday, the SOL Palantir Covered Call OTM Bond Mixed ETF and the SOL Palantir US Treasury Covered Call Mixed ETF posted annualized dividend yields of 28.16 percent and 24.20 percent, respectively, as of Thursday. The two products ranked first and second among 62 covered-call ETFs listed in South Korea.

A covered-call ETF holds an underlying asset such as shares while selling call options — the right to buy that asset at a set price. The strategy sacrifices some upside from share price gains in exchange for option premiums, which fund distributions.

The SOL Palantir Covered Call OTM Bond Mixed ETF allocates 30 percent to a covered-call strategy using Palantir shares and out-of-the-money (OTM) weekly call options struck at roughly 103 percent of the current price, with the remaining 70 percent in short-term government bonds. When Palantir's share price rises by up to 3 percent in a given week, the covered-call portion participates in that gain while also collecting option premiums. If the share price surges well beyond 3 percent in a short period, however, the sold call options can limit further upside participation in the covered-call portion.

The SOL Palantir US Treasury Covered Call Mixed ETF allocates up to 30 percent to Palantir shares, with the remaining 70 percent in a weekly covered-call strategy based on long-term US Treasuries. The product aims to participate in Palantir share price gains while using Treasury interest income and option premiums to build a relatively stable source of monthly distributions.

Palantir, the underlying holding for both ETFs, recently delivered earnings that exceeded market forecasts. Second-quarter sales rose 93 percent year on year, while US commercial revenue grew 149 percent. Palantir also raised its full-year sales guidance, and its share price surged roughly 30 percent in a single day immediately after the earnings release.

Palantir operates through three core platforms: Gotham, which serves government and defense clients; Foundry, a data platform for commercial industries; and AIP, its generative AI platform. Through AIP, the company helps enterprises integrate their own data with large language models for real-world business use, expanding its customer base beyond the US government and defense market into the broader private sector.

"Palantir posted record-breaking earnings that far exceeded market expectations, with second-quarter sales up 93 percent year on year and US commercial revenue growing 149 percent," said Kim Gi-deok, head of the quantitative investment division at Shinhan Asset Management. "The rapid market penetration of AIP was confirmed through strong profitability, cash generation and the expansion of large contracts, and the significant upward revision to the full-year sales guidance has further reinforced confidence in the company's structural growth."

Kim added that the roughly 30 percent single-day surge in the share price immediately after the earnings release "strongly reflected those growth expectations in the market," and that "given the high volatility inherent in a single-stock holding, the covered-call strategy — which seeks to participate in Palantir's upside while generating monthly income and a volatility buffer through option premiums — could become increasingly useful."

Shinhan Asset Management is also expanding its presence in the pension market. Its flagship target-date fund (TDF) series has attracted more than 600 billion won ($423 million) in inflows this year, pushing total assets under management past 2 trillion won — nine years after the firm launched its Shinhan Maeum Pyeonhan Jeokgyeok TDF series in 2017.


hajun825@heraldcorp.com