WisdomTree’s options writing ETF, the WisdomTree PutWrite Strategy Fund (PUTW) has changed its index and name as it refocuses its strategy to provide more consistent income for investors.
PUTW was formerly the CBOE S&P 500 PutWrite Strategy Fund and tracked the CBOE S&P 500 PutWrite Index. The fund will now track the Volos US Large Cap Target 2.5% PutWrite Index. Changes include monthly income distributions and better diversification within its options positions.
“We’ve made a number of enhancements to PUTW, including moving from an annual income distribution to a monthly distribution. The index PUTW is now tracking has a 2.5% target income from writing put options on US large cap equities,” Jeremy Schwartz, global CIO at WisdomTree, explained to VettaFi. “This monthly target in the index should allow for a more stable income stream, which also results in a dynamic exposure to market beta that evolves with the volatility levels in the market.”
Options have become more popular this year for a variety of reasons, both for their potential to mitigate volatility and also for their ability to generate income through writing calls.
PUTW works by tracking the value of a collateralized put options sales strategy that includes the writing (or selling) of put options on the SPDR S&P 500 ETF Trust (SPY) as well as a cash collateral account that seeks to accrue interest at the same rate as a three-month Treasury bill rate each day.
It sells SPY puts and holds U.S. Treasury bills to track the price and yield performance of the index. The index seeks to track SPY puts that have a premium of 2.5%, and it tracks two separate SPY puts at any given time that have expiration dates 2 weeks apart.
“The Volos index we are tracking today is also more diversified from options positions perspective with 2 options included in the index instead of a single at the money strike,” Schwartz said. “Investors have gravitated to the options category both for income generation and volatility-dampening effects and we think this new index provides a nice combination of those objectives and goals.”
PUTW has an expense ratio of 0.44%.
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