Additionally, the active ETF will sell exchange traded index call options and purchases exchange traded index put options – writing index call options diminishes the fund’s volatility, provides steady cash flow and also contributes to overall return, but it also reduces the fund’s ability to profit form increases in value of its equity position. The ETF also buys index put options, which can hedge risks from significant declines over a short period.
“The combination of the diversified stock portfolio, the steady cash flow from the sale of index call options and the downside protection from index put options is intended to provide the Fund with the majority of the returns associated with equity market investments while exposing investors to less risk than other equity investments,” according to a prospectus sheet.
Current sector weights include industrials 18.4%, information technology 16.2%, consumer staples 15.8%, health care 11.8%, financials 11.7%, energy 7.9%, consumer discretionary 6.4%, utilities 6.0%, telecom services 3.7% and materials 2.1%.
The fund has 57 holdings, with top positions including UnitedHealth Group 2.0%, Cisco Systems 2.0%, Lockheed Martin 2.0%, General Dynamics 2.0% and Altria Group 2.0%.
For more information on new fund products, visit our new ETFs category.