Typically sell index calls (S&P 500 or NASDAQ 100) 1 to 3 months out. Some funds (EOI & EOS) sell calls on individual stock positions. Some sell 100% of their portfolio value and some sell a smaller % and some (JSN, JPZ, JLA & JPG) also buy out-of-the-money Puts to hedge even more.

Selling calls brings monthly or quarterly income into the fund and SHOULD cover a 8-9% dividend no matter what the market is doing. Any fund that is paying more (BEP, BEO, EEF, ECV. etc.) can dip into their NAV unless its been a really bull market like we've had over the past couple years. I wouldn't touch the higher yielding covered-call funds since they all trade at high premiums and are the most vulnerable to a down market.

Sideways to slightly up or down markets are when these funds should do the best although you have to differentiate between their NAV price and their market price. The NAV will underperform in a strong bull market but the market price can outperform since many of these high yielding funds went from 8-10% discounts last year to 8-10% premiums. Contrary to what you might think, these funds will NOT give you much protection in a bear market since historically, the market price will drop to a discount to the NAV. Even the Nuveen covered-call, buy put funds (JSN, JLA, JPZ & JPG) dropped as much last spring, which doesn't make alot of sense since they are fully hedged. I have found that typically, the NAV of these funds will correlate to about 2/3 of what the indexes are doing plus or minus their individual strategies. i.e. if the market goes up or down 10%, the NAV will go up or down 6.6% roughly. The market price is a whole nother story and can swing alot more. I would suggest concentrating on the discounted covered-call funds that pay in the 8-9% range. BTW, BEP & BEP will both mature in 2010 and at some point, they will be good shorts since they both trades at heafty premiums and I believe their NAV's will not go up much even in a bull market.