BlackRock Launches First BuyWrite Fixed Income ETFs | ETF Trends

BlackRock today launched a trio of new ETFs that provide access to buy-write investment strategies on baskets of fixed income securities.

The new suite of fixed income products is comprised of the iShares 20+ Year Treasury Bond BuyWrite Strategy ETF (TLTW), the iShares High Yield Corporate Bond BuyWrite Strategy ETF (HYGW), and the iShares Investment Grade Corporate Bond BuyWrite Strategy ETF (LQDW). Each ETF packages two potential income sources into one ticker — premiums generated by selling monthly call options on the underlying ETFs (TLT, HYG, and LQD) and the yields from each of the underlying ETFs themselves, BlackRock said in a statement.

The iShares BuyWrite ETFs aim to increase yield potential for investors, debuting during the most challenging environment for fixed income in decades due to inflation, hawkish central banks, and interest rate volatility, the firm said in a statement.

“BlackRock is the fixed income ETF industry leader, and these new products should spur continued asset growth through product development connected to some of the most recognized and liquid ETFs in the asset class,” Todd Rosenbluth, head of research at VettaFi, said. “They remain pioneers within the ETF ecosystem.”

Each iShares BuyWrite ETF seeks to track a designated index from Cboe Global Indices by owning shares of the underlying ETF and selling one-month call options at a strike price at or near the closing price of the ETF the day before the strategy writes the call options. Each month, the iShares BuyWrite ETFs will distribute to shareholders both the call option premiums collected and the underlying funds’ monthly distributions.

“TLT, HYG and LQD have grown into important financial instruments in the fixed income markets and have some of the most liquid options markets of any ETF,” Stephen Laipply, U.S. head of bond ETFs at BlackRock, said in a statement. “Our buy-write exposures expand the functionalities of bond ETFs by unlocking a sophisticated use case with a potential to enhance income for investors in this volatile yield environment.”

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