Nearly a year ago the ETF industry saw the launch of the first leveraged and inverse single-stock ETFs. The debut of those products was preceded by a significant amount of buzz, but the first closures for that batch of funds are already unfolding. And the rest of those launches from last summer have not gathered as much in assets as many expected.
There are 24 such products currently trading, with the first having shut down on Tuesday and five more slated to close at the end of next week. That will leave 19 products that currently have roughly $1 billion in assets under management. That’s not a lot of assets for a category that evoked so much chatter in the first half of 2022 in the lead-up to their launches.
The $612 million Direxion Daily TSLA Bull 1.5X Shares ETF (TSLL) is the largest of these funds.
But there are other facets to the “single-stock ETF” trend to consider.
Options Strategies for Single-Stock ETFs
There’s been a wavelet of ETFs offering options strategies on individual stocks that have debuted with little fanfare. Innovator ETFs were first on the scene with the Innovator Hedged TSLA Strategy ETF (TSLH), which launched in July 2022. The fund provides capped upside exposure to Tesla’s stock performance and hedged downside exposure to the same for a three-month outcome period. However, after nearly a year of trading, the fund still has just $2 million in assets under management.
The YieldMax brand of ETFs debuted in November with its first fund, the YieldMax TSLA Option Income Strategy ETF (TSLY), which applies a synthetic covered call strategy to Tesla stock. The fund has grown to nearly $95 million in assets since its launch. Two more funds have launched under the YieldMax banner offering similar strategies on the stock of Apple and NVIDIA.
Covered call strategies are known for their tendency to reduce overall volatility and generate income via options premiums. A smoother ride along with the benefit of income could have a lot of appeal for investors in these times of volatile markets.
More Single-Stock ETFs Ahead
There are more single-stock covered call ETFs in the pipeline with the SEC that will be launched under the YieldMax and REX Shares names, as noted in Friday’s “This Week in ETFs” column.
The proposed YieldMax ETFs include the following:
- YieldMax MSTR Option Income Strategy ETF (MSTY)
- YieldMax BABA Option Income Strategy ETF (BABO)
- YieldMax ABNB Option Income Strategy ETF (ABNY)
- YieldMax AMD Option Income Strategy ETF (AMDY)
- YieldMax MRNA Option Income Strategy ETF (MRNY)
- YieldMax PYPL Option Income Strategy ETF (PYPY)
- YieldMax DIS Option Income Strategy ETF (DISO)
- YieldMax JPM Option Income Strategy ETF (JPMO)
- YieldMax MSFT Option Income Strategy ETF (MSFO)
- YieldMax XOM Option Income Strategy ETF (XOMO)
Meanwhile, the REX filing includes the following single-stock ETFs:
- REX IncomeMax AMD Strategy ETF
- REX IncomeMax AMZNStrategy ETF
- REX IncomeMax BABA Strategy ETF
- REX IncomeMax BIIB Strategy ETF
- REX IncomeMax DIS Strategy ETF
- REX IncomeMax GOOG Strategy ETF
- REX IncomeMax META Strategy ETF Ticker
- REX IncomeMax MSFT Strategy ETF Ticker
- REX IncomeMax MSTR Strategy ETF
- REX IncomeMax PYPL Strategy ETF
- REX IncomeMax SNOW Strategy ETF
- REX IncomeMax TLRY Strategy ETF
- REX IncomeMax V Strategy ETF
Yet Another Single-Stock ETF Angle
The REX Shares filings also include six funds that will deliver covered-call options strategies on six popular ETFs. Those proposed funds are as follows:
- REX IncomeMax EEM Strategy ETF
- REX IncomeMax GDXJ Strategy ETF
- REX IncomeMax SLV Strategy ETF
- REX IncomeMax SMH Strategy ETF
- REX IncomeMax UNG Strategy ETF
- REX IncomeMax USO Strategy ETF
These single-security products are not as cutting edge as the single-stock covered call ETFs as similar funds targeting other ETFs or their indexes have been around for some time. However, their broader exposure could be appealing to investors who don’t have the stomach to deal in strategies around individual stocks.
Indeed, while leveraged and inverse single-stock ETFs haven’t broken any records, ETFs offering risk-managed exposure to individual securities rather than big bets on them could find firmer footing in the marketplace.
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