WisdomTree Debuts PutWrite Strategy ETF
New York-based WisdomTree has launched an options-driven ETF.
The CBOE S&P 500 PutWrite Strategy Fund will attempt to provide investors with a level of volatility protection while enabling them to maintain or enhance returns.
The new fund will attempt to follow the CBOE S&P 500 PutWrite Index, which has historically had a lower standard deviation than the S&P 500 index. From June 30, 2007, to December 31, 2015, the index captured 97% of the S&P 500’s return but only 77% of the volatility.
“Put writing has been used by investors for decades as a solution to potentially increase the yield and lower the volatility of equity returns over various market cycles,” said Luciano Siracusano, WisdomTree’s chief investment strategist. “We’ve teamed up with the Chicago Board Options Exchange [CBOE], a leader in options investing, to provide access to an index developed with a live track record dating to 2007 that has shown lower volatility over time, relative to the S&P 500.”
Since 2007, the PutWrite Index outperformed 95% of the time when the S&P 500 experienced a daily negative return.
The new fund will invest in one- and three-month Treasury bills and write S&P 500 index put options. The number of options sold will be chosen to attempt to ensure full collateralization, and the amount of cash invested in Treasury bills will be set to cover any potential losses from writing the puts—thus, ideally, there will be no leverage in the writing of the puts.
The fund will roll options monthly.
First American Launching Retail Money Market Fund
Minneapolis-based First American will launch the First American Retail Prime Obligations Fund, a money market mutual fund.
The new fund will replace the current First American Prime Obligations Fund, which will be renamed the First American Institutional Prime Obligations Fund. Investors in the current fund will be able to exchange into the new fund at the time of the fund’s launch.
The fund will attempt to maintain a stable $1 per share net asset value. It is scheduled to launch on July 18.