Covered call funds — why the underperformance?
It seems like in a perfect universe, with call options being rationally priced, the total return of covered call funds would mirror the total return of the underlying index.
However, it seems to be generally agreed that they will underperform an index over time due to the fact that they are “selling off the upside”.
Assuming this is true, it implies to me that the prices of call options is too low. But it a free market place, they should be priced accurately.