Daily ETF Watch: ALPS Plans Put-Write Fund

ALPS looks to add a second put-write ETF to its lineup.

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Reviewed by: Heather Bell
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Edited by: Heather Bell

A recent filing from ALPS indicates the firm is planning to launch an actively managed put-write ETF. The firm launched the ALPS U.S. Equity High Volatility Put Write Index Fund (HVPW) in February 2013; the index-based fund writes put options on the 20 highest-volatility stocks on the market and has $50 million in assets under management.

 

The proposed ALPS Enhanced Put Write Strategy ETF (PUTX) will be actively managed, according to its prospectus. The fund will sell one-month put options on the SPDR S&P 500 ETF, while the premiums and cash in the portfolio will be invested in an actively managed fixed-income portfolio. The debt portfolio will hold investment-grade securities with a year or less to maturity, including Treasury bills, corporate bonds, commercial paper and mortgage- and asset-backed securities.

 

A few weeks ago, WisdomTree put the WisdomTree CBOE S&P 500 PutWrite Strategy Fund into registration. Like HVPW, it will track an index, but it follows a very similar strategy to ALPS’ latest filing. However, according to its prospectus, instead of writing put options on SPY, it will write puts on the S&P 500 Index itself, and instead of an actively managed short-term debt portfolio, it will invest its cash and premiums in a money market account consisting of one- and three-month Treasury bills.

 

Options strategies are known to be a way of generating income, and that’s an attractive prospect in today’s low-rate environment. However, many find options to be intimidating, even while recognizing the possible benefits; ETFs incorporating options strategies may appeal to those investors, in particular.

 

The ALPS fund will list on the NYSE Arca exchange with the PUTX ticker, but the prospectus did not include an expense ratio.

 

 

 

Heather Bell is a former managing editor of etf.com. She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.