It is with great regret that I have to announce the failure of yet another product to protect the consumer wishing to draw an income from a market based investment strategy.

Ladies and Gentlemen , I give you the covered call ETF

It is a structured product that gives you rather less in good times but doesn’t make the bad times any better. Drawdown your covered ETF to buy yourself a decent August and you’re looking at pound cost ravaging.

CBOE’s S&P 500 Buywrite index, a benchmark for covered call strategies, dropped 2.8 per cent on Monday, only marginally better than the S&P 500’s 3 per cent fall.

While the S&P is still up 9 per cent year to date, the Buywrite is up less than 4 per cent. “These funds don’t like volatility,” said Ronald Lagnado, research director at Universa Investments, a fund that specialises in hedging against serious market downturns.

“They call it an income strategy, but really you’re just selling volatility. That can work out for long periods but can get completely hammered when you have a severe crash.”

The potential defensive appeal of covered calls gained traction in 2022 as both equity and bond markets went into slow and steady declines. But Lagnado said that over the long term, their performance was little different from a classic 60/40 portfolio of stocks and Treasury bonds.

When it gets really wet, an umbrella isn’t enough, you need to be inside in some communal dwelling. Drawdown just doesn’t help when the market can do this in a day.

The simple answer to the complex problem is to buy yourself a pension where you are in a well managed investment that pays a consistent income , with proper backing regulated by experts.