The fund’s expense ratio is 0.65 percent.
Other Covered Call ETFs
Two other covered call-related exchange-traded products––one an ETF; the other an exchange-traded note––are based on the CBOE S&P 500 BuyWrite Index. The index measures the returns of a buy-write, or covered call strategy based on buying an S&P 500 stock index portfolio and writing one-month call options listed on the Chicago Board Options Exchange.
The PowerShares S&P 500 BuyWrite Portfolio (PBP) fund has had an annualized return of 0.77 percent since inception in December 2007, and was up 1.87 percent year-to-date through Friday. The fund has significantly trailed the S&P 500 index during those respective timeframes.
This PowerShares ETF has attracted assets of $190 million, and has an expense ratio of 0.75 percent. The fund’s SEC 30-day yield was 2.42 percent as of Friday.
The iPath CBOE S&P 500 BuyWrite Index ETN (BWV) has generated annualized returns of 1.38 percent since its May 2007 inception and had gained 4.81 percent year-to-date through Friday. The ETN has $9 million in assets, and its expense ratio is 0.75 percent. The note doesn’t generate excess yield per se; rather, the yield that’s produced is part of ETN’s total return.
Garrett Stevens, CEO of ETC, says the big difference between the underlying index of these two funds and the index underlying the Horizons S&P 500 Covered Call ETF is that the former writes options on the total return of the S&P 500 index while the latter writes options on individual stocks within the index.
“We have 400-something options in the portfolio at a given time that roll over each month,” he says. “That creates much better yield than writing options on just the index.”