An ETF that we have featured periodically seems like good subject matter this morning, particularly because it continues to be an undercovered strategy, is HVPW (ALPS U.S. Equity High Volatility Put Write, Expense Ratio 0.95%).
The fund debuted in late February of 2013, and has gathered about $60 million in assets under management since inception, making it the fifth largest ETF in terms of AUM size in the greater “Alternatives” category.
Yield seekers will likely be impressed by the 9.18% yield that we see from the product, which makes an investigation into what the fund does exactly, warranted. According to fund literature “The U.S. Equity High Volatility Put Write Index Fund (HVPW) seeks investment results that correspond generally to the performance, before the Fund’s fees and expenses, of an index called the NYSE Arca U.S. Equity High Volatility Put Write Index.
The index reflects the performance of a portfolio of exchange-traded put options on a selection of the largest capitalized stocks which also have listed options and which have the highest volatility, as determined by the NYSE Arca Inc., the Fund’s index provider.
Put options are financial instruments that give the owner/buyer the right, but not the obligation, to sell a specified quantity of a security at a set price called the “strike” price on or before an agreed upon expiration date.”
Furthermore, literature explains “Selling puts is a frequently implemented income strategy. HVPW provides the beneficial features of put writing with the transparency and liquidity of
the ETF structure. This results in benefits such as: 1) HVPW offers diversification by holding a portfolio of 20 names rolling every 2 months (i.e. 120 puts per year). 2) HVPW has a total annual operationg expenses of 0.95%. 3) HVPW holds U.S. Treasury Securities and short listed options positions.”
Our takeaways here are that the product may be interesting for those portfolio managers whom are looking for income strategies but lack the resources, experience, or even securities licenses to actually sell puts themselves in the marketplace for investor portfolios, and moreover want someone else to do the screening necessary to identify where potentially sound put writing opportunities exist.
ALPS U.S, Equity High Volatility Put Write Fund
For more information on Street One ETF market commentary and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com
Street One Financial is an educational/research firm utilizing the Broker Dealer services of Precision Securities, a FINRA registered Broker/Dealer.