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Option Trading ETFs

There are 45 ETFs that use option trading as an investment strategy.

Covered calls17

The "broad" strategy means that the ETF can or is using both put writing and covered calls.

Covered calls

A “covered call” is an income-producing strategy where you sell, or “write”, call options against shares of stock you already own. Typically, you’ll sell one contract for every 100 shares of stock. In exchange for selling the call options, you collect an option premium. But that premium comes with an obligation. If the call option you sold is exercised by the buyer, you may be obligated to deliver your shares of the underlying stock. Fortunately, you already own the underlying stock, so your potential obligation is “covered” – hence this strategy’s name, “covered call” writing.

Here are the ETFs that use covered call writing as a strategy, if you want to read some examples of the approaches taken by these ETFs:

SymbolDescriptionInception DateCurrent Dividend YieldActions
PBPInvesco S&P 500 BuyWrite Portfolio ETF12/20/20070.94%Analyze
VEGAAdvisorShares STAR Global Buy-Write ETF09/17/20121.81%Analyze
GLDIGold Covered Call Option ETN01/29/20137.81%Analyze
SLVOSilver Covered Call Option ETN04/17/20139.59%Analyze
XYLDGlobal X S&P 500 Covered Call ETF06/21/201311.64%Analyze
QYLDHorizons NASDAQ 100 Covered Call ETF12/11/201311.54%Analyze
FTHIFirst Trust BuyWrite Income ETF01/06/20148.86%Analyze
DIVOAmplify Yieldshares CWP Dividend Option Income ETF12/13/20164.66%Analyze
USOIX-Links Crude Oil Shares Covered Call ETN04/26/201712.57%Analyze
KNGCboe Vest S&P 500 Dividend Aristocrats Target Income ETF03/27/20184.15%Analyze
RYLDGlobal X Russell 2000 Covered Call ETF04/22/201911.62%Analyze
ACIOAptus Collared Income Opportunity ETF07/10/20191.30%Analyze
SIXH6 Meridian Hedged Equity-Index Option Strategy ETF05/11/20202.35%Analyze
QYLGGlobal X Nasdaq 100 Covered Call & Growth ETF09/21/20204.73%Analyze
XYLGGlobal X S&P 500 Covered Call & Growth ETF09/21/20204.54%Analyze
XRMIGlobal X S&P 500 Risk Managed Income ETF08/26/202111.55%Analyze
DJIAGlobal X Dow 30 Covered Call ETF02/24/20229.17%Analyze

ETFs that are using a covered call strategy often have a high dividend yield, because of the income generated through selling the call options. But the income isn't "real", because you earn the dividend income at the expense of the ETF not tracking the underlying asset. So to properly analyze a covered call ETF, you have to look at the total return of the ETF, not just the market price.

Let's look at an example. GLDI, the X-Links Gold Shares Covered Call ETN, tracks QGLDI, the Credit Suisse NASDAQ Gold FLOWS (Formula-Linked OverWrite Strategy) 103 Index (the “Index”). The Index seeks to implement a “covered call” investment strategy by maintaining a notional long position in shares of GLD, the SPDR Gold Trust ETF while notionally selling monthly out-of-the-money call options on that position. GLDI has a really high dividend yield, but the market price of GLDI has significantly trailed the market price of GLD, the SPDR Gold Trust ETF:

Even though GLDI has a high dividend yield, if you look at GLDI's total return index (QGLDITR), you can see that the high dividend yield didn't really help your overall return, as you would have been just as well off owning GLD, the SPDR Gold Trust:

Cash secured put writing

An investor who employs a cash-secured put writes a put contract, and at the same time deposits in his brokerage account the full cash amount for a possible purchase of underlying shares. The purpose of depositing this cash is to ensure that it's available should the investor be assigned on the short put position and be obligated to purchase shares at the put's strike price. While the cash is on deposit it may generally be invested in short-term, interest-bearing instruments.

When an investor writes or sales a put contract, the investor agrees to buy a stock during a specified period of time at a fixed price, called a strike price. The strike price is below the stock's current market price, so the investor writing a put contract is telling the buyer of the put: "if this stock drops in value, I will buy it from you, and I will pay X dollars for it". Regardless of the direction the stock price takes after the put is sold, or whether assignment is received or not, the put seller keeps the premium.

On the downside, the break-even point for this strategy is an underlying stock price equal to the put's strike price less the premium received for selling it. If the stock declines significantly below the strike price by expiration, on assignment the investor may be obligated to purchase shares well above their current price level. Stock bought under this circumstance may therefore reflect a loss compared to its market price at the time. However, this loss would be unrealized as long as the investor holds the shares and is positioned to profit from an increase in their price. Any investor whose motivation in writing a cash-secured put is to buy underlying stock should therefore be committed in advance to a target price for a possible purchase, and select a strike price accordingly.

On the upside the risk is one of opportunity loss. After selling the put the underlying stock price can go up and remain above the put's strike price. In this case, neither a put seller who is not assigned, nor an investor who originally entered a low limit order for the stock instead, will buy the stock. The put seller, however, keeps the put sale premium received.

Here are the ETFs that use put writing as a strategy, if you want to read some examples of the approaches taken by these ETFs:

SymbolDescriptionInception DateCategoryActions
PUTWWisdomTree CBOE S&P 500 PutWrite Strategy ETF02/24/2016AlternativesAnalyze
TAILCambria Tail Risk ETF04/07/2017AlternativesAnalyze
QQDSimplify Growth Equity Plus Downside Convexity ETF12/11/2020AlternativesAnalyze
FAILCambria Global Tail Risk ETF03/15/2021AlternativesAnalyze
XTRGlobal X S&P 500 Tail Risk ETF08/26/2021AlternativesAnalyze

ETFs that use both strategies

Here are the ETFs that use both put writing and covered call writing as a strategy, if you want to read some examples of the approaches taken by these ETFs:

SymbolDescriptionInception DateCategoryActions
CCORCore Alternative ETF05/24/2017AlternativesAnalyze
SWANAmplify BlackSwan Growth & Treasury Core ETF11/06/2018AlternativesAnalyze
NUSINationwide Risk-Managed Income ETF12/20/2019AlternativesAnalyze
JEPIJPMorgan Equity Premium Income ETF05/21/2020AlternativesAnalyze
SPDSimplify US Equity PLUS Downside Convexity ETF09/04/2020AlternativesAnalyze
SPUCSimplify US Equity PLUS Upside Convexity ETF09/04/2020AlternativesAnalyze
SPYCSimplify US Equity PLUS Convexity ETF09/04/2020AlternativesAnalyze
QQCSimplify Growth Equity Plus Convexity ETF12/11/2020AlternativesAnalyze
HEGDSwan Hedged Equity US Large Cap ETF12/23/2020AlternativesAnalyze
OVLHOverlay Shares Hedged Large Cap Equity ETF01/15/2021AlternativesAnalyze
ISWNAmplify BlackSwan ISWN ETF01/26/2021AlternativesAnalyze
ZHDGZEGA Buy and Hedge ETF07/07/2021AlternativesAnalyze
VSPYVectorShares Min Vol ETF 07/20/2021AlternativesAnalyze
IDMEAptus International Drawdown Managed Equity ETF07/23/2021AlternativesAnalyze
XCLRGlobal X S&P 500 Collar 95-110 ETF08/26/2021AlternativesAnalyze
CYASimplify Tail Risk Strategy ETF09/14/2021AlternativesAnalyze
BNDDQuadratic Deflation ETF09/21/2021AlternativesAnalyze
GTRWisdomTree Target Range ETF10/06/2021AlternativesAnalyze
GLDXUSCF Gold Strategy Plus Income Fund ETF11/03/2021AlternativesAnalyze
QSWNAmplify BlackSwan Tech & Treasury ETF12/09/2021AlternativesAnalyze
NDJINationwide Dow Jones Risk-Managed Income ETF12/17/2021AlternativesAnalyze
NSPINationwide S&P 500 Risk-Managed Income ETF12/17/2021AlternativesAnalyze
NTKIETF Series Solutions Nationwide Russell 2000 Risk-Managed Income ETF12/17/2021AlternativesAnalyze

PUTW is an editor's choice

We have given PUTW a rating of editor's choice, our highest rating. There are times when PUTW outperforms the S&P 500 Index on a total return basis. More importantly, PUTW has a very low standard deviation of returns, meaning that on a risk-adjusted basis, PUTW often outperforms the S&P 500 Index.

Here is the theoretical, back-test data for PUT (the index that PUTW tracks) compared to the S&P 500 total return index:

All data is a live query from our database. The wording was last updated: 11/04/2018.

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