To buffer against potential downside in U.S. stocks, FTLB can use a portion of the income it receives from selling calls on its holdings to purchase S&P 500 puts.
FTLB’s top-10 holdings include Dow components Johnson & Johnson (NYSE: JNJ), General Electric (NYSE: GE), AT&T (NYSE: T) and Pfizer (NYSE: PFE) as well as Altria (NYSE: MO), ConocoPhillips (NYSE: COP) and Priceline (NasdaqGM: PCLN).
Rival covered call ETFs include the Horizons S&P 500 Covered Call ETF (NYSEArca: HSPX), Horizons Financial Select Sector Covered Call ETF (NYSEArca: HFIN) and the Recon Capital NASDAQ 100 Covered Call ETF (NasdaqGS: QYLD).
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of GE and Pfizer.