May 29, 2007 at 8:07 am by Tom Lydon
Barclays Global Investors added another fund to their iPath family of exchange traded notes (ETNs), similar to exchange traded funds (ETFs). The iPath CBOE S&P 500 BuyWrite Index ETN (BWV) will track the CBOE S&P 500 BuyWrite Index. In a buy-wright investment strategy an investor buys stocks and then writes covered call options on them. Matt Hougan for Index Universe reports the funds make money from the premiums on the calls which are paid out on a quarterly basis. As for now, some closed-end buy-write funds are yielding around 9%. This method is great in a sideways market, can offer protection on a downward market but the catch is that it can hinder performance on a market upswing. Buy-writes can lag in a bull market but considering the choppy markets of late they are regaining interest. This investment strategy of covered-calls may not be for everyone, but it is an example of how ETFs and ETNs can offer access to different strategies.
Tags: ETNs
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June 1st, 2007 at 8:18 pm
Will be at the ETF show in NYC. Perhaps we can spend a few minutes together.
Am writing a book on ETF’s
Sincerely,
Neal
June 4th, 2007 at 10:23 am
Neal-
Let’s get together Thursday afternoon at the conference.
Looking forward to meeting you.
Tom