Peerless Wealth Launches Option Wheel Strategy ETF

On Thursday, Peerless Wealth rolled out the Peerless Option Income Wheel ETF (WEEL).

The fund is actively managed and seeks to provide investors with current income. It launched has a net expense ratio of 1.07%.

To achieve income goals, Peerless Wealth applies a two-pronged strategy. Firstly, the prospectus noted that the fund invests in a series of sector-specific ETFs. WEEL may also invest in some individual securities.

In selecting sectors to allocate securities to, the fund managers use the Global Industry Classification Standard (GICS) as a guidepost. GICS may also be used as a baseline to determine sector weighting for more balanced exposure. In instances where the fund is willing to take risks, WEEL may instead opt for a strategy that is more aggressive than the market averages.

The second stage of WEEL’s investment plan uses an option wheel strategy. Option wheel strategies can be a potent means for traders and investors to accrue income.

Option Wheel Strategy

An option wheel strategy entails the continuous sale of cash-secured put options. This bolsters the strategy’s overall income as the fund prepares for shares to be assigned. Once shares get assigned, covered calls are then sold against the shares.

For WEEL, the fund sells put options against the underlying ETFs and individual securities. If the share prices for the ETFs and securities fall beneath the put option strike price, the fund is likely to receive shares. Once shares are acquired, the fund sells covered call options against these positions.

This strategy continues until the share price surpasses the strike price of the call options. From there, this particular investment cycle ends and the next one can begin.

The fund prospectus noted that the majority of income achieved by the fund will be from collecting options premiums. This enables WEEL to achieve capital appreciation regardless of whether markets are rising or not.

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