Income-seeking investors can utilize a newly launched alternative exchange traded fund strategy to generate yields in a slightly downward trending or sideways market.
WisdomTree Investments launched the WisdomTree CBOE S&P 500 PutWrite Strategy Fund (NYSEArca: PUTW), according to a press release. PUTW has a 0.38% expense ratio.
The PutWrite ETF will try to reflect the performance of the CBOE S&P 500 PutWrite Index, which implements a put write strategy on the S&P 500 Index. PUTW includes one- and three-month Treasury bills and sells or “writes” one-month, at-the-money, S&P 500 Index puts.
“Put writing has been used by investors for decades as a solution to potentially increase the yield and lower the volatility of equity returns over various market cycles,” Luciano Siracusano, WisdomTree Chief Investment Strategist, said in the press release.
For instance, PUTW’s underlying index has historically exhibited a lower standard deviation than the S&P 500 index. The benchmark provided 97% of the return of the S&P 500, with only 77% of the volatility, from June 2007 through the end of 2015.