PowerShares is set to launch the first family of BuyWrite exchange traded funds (ETFs) in December 2007. They will provide access to but-write option strategies on three of the most widely used benchmarks -the S&P 500, Dow Jones Industrial Average, and NASDAQ-100 Indexes.

The company states that buy-write strategies are often used to reduce volatility, during certain market conditions, and can provide additional income to a portfolio through call option premiums.  In a buy-wright investment strategy an investor buys stocks and then writes covered call options on them.  Barclays introduced a buy-write ETN in May.  iPath CBOE S&P 500 BuyWrite Index ETN (BWV) is up 0.4% since inception.

The new ETFs anticipated on December 20th include:

  • PowerShares S&P 500 BuyWrite Portfolio (PBP)
  • PowerShares DJIA BuyWrite Portfolio (PGB)
  • PowerShares NASDAQ-100 BuyWrite Portfolio (PQBW)

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.