SoFi Launches New Options Income ETF

SoFi Technologies Inc. has teamed up with asset manager Zega Financial to launch a new income-generating options ETF as billions of dollars have flowed into some of the biggest funds in that category this year. 

The new SoFi Enhanced Income ETF (THTA), issued by SoFi and managed by Zega, is an actively managed options exchange-traded fund. The fund trades options on the S&P 500, Nasdaq-100 and Russell 2000 Index using a portfolio of one-to-three-month Treasury bills as collateral. The strategy is meant to generate income through the yields generated by the Treasuries it holds and the premiums it receives from the sale of options. 

The strategy is similar to the one used by the JPMorgan Equity Premium Income ETF (JEPI), which combines an options strategy with a portfolio of stocks, rather than Treasuries. The $29.8 billion JEPI is the largest options ETF and the largest active ETF in the U.S. and has attracted $12.8 billion in inflows this year. The flows followed substantial outperformance by JEPI during the 2022 market downturn, according to Morningstar. 

Other ETFs that use options strategies have also raked in major inflows in 2023, such as the nearly $8 billion Global X NASDAQ 100 Covered Call ETF (QYLD), which has drawn $900 million in investor cash. 

High Treasury Yields 

Because it holds Treasury bills rather than stocks, THTA doesn’t provide exposure to stock market gains like JEPI. Instead, it offers an additional income stream from its Treasuries. That source of income is especially attractive now with the yield on three-month Treasury bills hovering at just over 5.5% in recent months, the highest level since 2000. 

The income stream, however, may decrease if the Federal Reserve cut rates next year as it is now expected to do.  

Contact Gabe Alpert at [email protected]