Call-writing strategies have been around for a while through closed-end funds (CEFs) and exchange traded notes (ETNs), but most recently, through an exchange traded fund (ETF), the first of its kind.
PowerShares S&P 500 Buy Write Portfolio (PBP) has the potential to overcome some of the downside to investing in a buy-write strategy through other investment tools, and has Roger Nusbaum for TheStreet downright excited.
Buy-write is a strategy that involves buying a stock and selling call options, which are rights to buy stocks at a predetermined price. The upside is smoother returns, as income can be generated by helping to offset declines in a portfolio. The downside is that the strategy could lag when the market is up. In that case, you are forced to sell stocks at below-market prices. PBP offers the potential to avoid this with low volatility and some yield.
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.