HDFC Mutual Fund will introduce a covered call strategy in HDFC Balanced Advantage Fund and HDFC Children’s Fund from November 9, 2026. Existing unit holders will get a 30-day exit window from October 8 to November 6, 2026, during which they can redeem or switch without paying an exit load.
HDFC Asset Management Company has announced a change in the investment strategy of HDFC Balanced Advantage Fund and HDFC Children’s Fund. The schemes will introduce a covered call strategy from November 9, 2026.
The schemes can write call options against certain equity shares already held in their portfolios under the new strategy. The strategy will be limited to constituent stocks of the NIFTY 50 and BSE SENSEX.
The total notional value of the call options written cannot exceed 15% of the market value of the underlying equity shares held by the scheme. The number of shares underlying these options will also be capped at 30% of the unencumbered shares of the respective company held by the scheme.
The scheme will have to hold the underlying shares when writing a call option. The options will also be marked to market daily, with the resulting gains or losses reflected in the scheme’s NAV.
What does it mean for you?
A covered call strategy involves holding shares and selling call options on those shares. The scheme can earn an option premium from writing the call. This can provide an additional source of income when the fund manager does not expect the underlying stock to rise significantly in the short term.
However, the strategy also introduces derivatives-related risks. The scheme’s returns can be affected by factors such as option pricing, expiry periods, volatility and corporate actions.
The proposed change is considered a change in the fundamental attributes of both schemes. It has been approved by the AMC’s board, noted by the trustees, and SEBI has noted the proposed changes.
Existing unit holders whose valid applications were received by 3:00 p.m. on October 1, 2026, have been given an exit option from October 8 to 3:00 p.m. on November 6, 2026.
During this period, eligible unit holders who do not agree with the change can redeem their units or switch to another HDFC Mutual Fund scheme without paying an exit load, subject to the applicable conditions and cut-off timings.
The exit option is voluntary. If you are comfortable with the proposed change, no action is required.
Unit holders with SIPs who do not wish to continue their future investments must separately cancel their SIP registrations.
Source: HDFC Mutual Fund Notice-cum-Addendum dated October 1, 2026.
