HSPX looks like it will compete with PowerShares S&P 500 BuyWrite Portfolio (NYSEArca: PBP) and similar ETFs. PBP holds assets of about $190 million. [ETF Chart of the Day: Buy-Write Strategies]
However, HSPX is unique in that it will sell out-of-the-money call options on individual stocks, rather than the entire S&P 500 Index. The new ETF has an expense ratio of 0.65%, lower than existing buy-write funds.
The tracking index is designed by S&P Dow Jones Indices.
When selling call options on individual stocks, the index sets strike prices based on the stock’s implied volatility. The higher the volatility, the higher the strike price.
“This particular approach to writing covered calls on a portfolio of stocks is supported by a significant body of academic literature that suggests it can potentially offer an optimal balance between generating attractive monthly income while preserving more of the upside potential of the underlying stocks,” according to Horizons.
Horizons ETF Group manages sponsors products in Canada, Korea, Hong Kong, Australia, and now in the U.S.
Its total ETF assets stand at about $7 billion spread over 180 products worldwide.