Cboe Vest, majority-owned asset management subsidiary of Cboe Global Markets, Inc., has launched its first ETF under its new Cboe Vest brand, providing investors with a so-called second generation of option-based index strategies.
On Tuesday, Cboe Vest rolled out the Cboe Vest S&P 500 Dividend Aristocrats Target Income ETF (Cboe: KNG), which has a 0.75% expense ratio.
The new Cboe Vest S&P 500 Dividend Aristocrats Target Income ETF tries to reflect the performance of the Cboe S&P 500 Dividend Aristocrats Target Income Index Monthly Series, a rules-based index designed with the primary goal of generating income from stock dividends and option premiums from overwriting a small portion of the stock holdings that is approximately 3% over the annual dividend yield of the S&P 500 Index and a secondary goal of generating price returns that are proportional to the price returns of the S&P 500 Index, according to a prospectus sheet.
This options strategy tries to fill the gap in a low bond yield environment and concerns over fixed-income securities as a source of regular income due to rising rate fears.
Options 2.0 ETF Strategies
“ETFs have come a long way since the launch of market-cap-weighted equity strategies in the 1990’s. KNG marks the beginning of ‘Options 2.0’ ETF strategies that seek to incorporate inventive uses of options to achieve return features consistent with a targeted goal (in this case the level of income) in portfolios,” Karan Sood, CEO of Cboe Vest, said in a note.