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Equity

Madison Covered Call

Strategy Overview

Madison Covered Call is an actively managed, high-quality, and high-conviction strategy that seeks consistent total return and a high level of income and gains from option premiums. To pursue this goal, we employ a fundamental, bottom-up process to invest in common stocks of large and mid cap companies, then write (sell) covered call options on a substantial portion of the portfolio securities.

Key Facts

Benchmarks CBOE S&P 500 BuyWrite BXM Index, S&P 500 Index
Strategy Inception April 2006
Positions 30-60
Investment Vehicles Mutual Fund
Active ETF
Mutual Fund
Active ETF

Experienced Management

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Investment Process

Active Stock Selection

We first conduct bottom-up, fundamental analysis of large and mid cap U.S. companies, incorporating macro and technical factors. Our high-quality, best-ideas approach emphasizes:

  • Companies with a sustainable competitive advantage, a strong balance sheet, accelerating earnings growth, rising return on invested capital, and free cash flow generation.
  • Attractive absolute and relative valuation.
  • Reasonable option premiums.

Active Options Overlay

Individual stock options typically offer higher premiums than index options. Options contracts are evaluated based on the outlook for the underlying stock and market to assess the total return potential for each stock/option pairing.

Defining Characteristics

Income generation and growth potential

Covered call writing strategy provides a diversified income stream with the potential for capital appreciation.

Participate & Protect

Out-of-the-money call writing allows for upside participation to the strike price of the related option, while premium income helps partially offset potential market losses.

Active management

High-quality, high-conviction stock investing with an active, single-stock options overlay.

Long-tenured management

Co-Portfolio Managers have over 60 years of combined investment experience.

As a writer of a covered call option, the fund forgoes, during the option’s life, the opportunity to profit from increases in the market value of the security covering the call option above the sum of the premium and the strike price of the call, but has retained the risk of loss should the price of the underlying security decline.

Madison U.S. Equity Department

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Consider the investment objectives, risks, and charges and expenses of Madison Funds carefully before investing. Each fund’s prospectus contains this and other information about the fund. Call 800.877.6089 or visit madisonfunds.com to obtain a prospectus and read it carefully before investing.

An investment in the fund is subject to risk and there can be no assurance that the fund will achieve its investment objective. The risks associated with an investment in the fund can increase during times of significant market volatility. The principal risks of investing in the fund include: equity risk, mid-cap company risk, option risk, tax risk, concentration risk and foreign security and emerging market risk.

As a writer of a covered call option, the fund forgoes, during the option’s life, the opportunity to profit from increases in the market value of the security covering the call option above the sum of the premium and the strike price of the call, but has retained the risk of loss should the price of the underlying security decline.

The Fund’s investment strategy reflects Madison’s general “Participate and Protect®” investment philosophy. Madison’s expectation is that investors in the Fund will participate near fully in market appreciation during bull markets and experience something less than full participation during bear markets compared with investors in portfolios holding more speculative and volatile securities. Therefore, the Fund’s investment philosophy is intended to represent a conservative investment strategy. There is no assurance that Madison’s expectations regarding this investment strategy will be realized.

Diversification does not assure a profit or protect against loss in a declining market.

Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only, and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance.

CBOE S&P 500 BuyWrite® Index (BXM): tracks the performance of a hypothetical buy-write strategy (i.e., holding a long position in and selling covered call options on that position) on the S&P 500® Index.

The S&P 500® is an unmanaged index of large companies and is widely regarded as a standard for measuring large-cap and mid-cap U.S. stock-market performance. Results assume the reinvestment of all capital gain and dividend distributions. An investment cannot be made directly into an index.