ETF Watch: A SPDR Buy-Write ETF Coming

November 14, 2016

State Street Global Advisors has put into registration an index-based buy-write ETF that would invest in shares of the SPDR S&P 500 ETF Trust (SPY) and sell call options on SPY.

Also known as a covered-call strategy, the SPDR NYSE Dynamic SPY Buy Write ETF would own SPY shares, and sell one-week call options on SPY in a mix that’s reviewed on a weekly basis as the options expire or close out, according to the prospectus.

Covered-call ETFs aim to generate income in the form of premiums on the options contracts, offering investors protection on the downside at the expense of some upside potential.

The ETF would go head-to-head with funds like the $285 million PowerShares S&P 500 BuyWrite Portfolio (PBP), and a look at PBP’s performance relative to SPY is a great example of how these strategies perform:

 

Chart courtesy of StockCharts.com

The prospectus did not specify a ticker or an expense ratio for the fund.

Contact Cinthia Murphy at cmurphy@etf.com

 

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