The Nationwide Risk-Managed Income ETF (NYSEArca: NUSI) is positioned as an income-generating strategy highly relevant for retirement portfolios, but investors shouldn’t be quick to pigeonhole the fund.
NUSI can act as a complement to traditional equity and fixed income allocations or as the ideal protective hedge for investors with heavy exposure to technology and growth stocks because the fund is a “rules-based options trading strategy that seeks to produce high income using the Nasdaq-100 Index,” according to Nationwide.
NUSI’s active approach to covered call writing coupled with its downside protection make it a credible strategic idea for investors that like to trade around events, including corporate earnings.
“Options can be useful in prepping for earnings season for a few reasons. They provide position and risk management flexibility, can limit downside risk, manage event risk and help to efficiently use capital,” according to CME Group.
NUSI’s Versatility: Income Generation and Risk Mitigation
The Nationwide Risk-Managed Income ETF incorporates options exposure to help generate income and mitigate risk as a way to enhance total returns. Investor s have long capitalized on covered call options strategies for income generation or protective put options strategies to protect against and limit losses.
“Whether trading options on futures for purposes of hedging or speculating, a trader can define risk and reward using different option strategies,” notes CME.
NUSI is an actively managed portfolio of stocks included in the Nasdaq-100 Index and an options collar. Per index rules, the fund only invests in the top 100 largest by market cap, nonfinancial stocks listed on NASDAQ. A collar strategy involves selling or writing call options and buying put options, thus generating income to hedge some downside risk. The strategy seeks to generate high current income monthly from any dividends received from the underlying stock and the option premiums retained.
Investors face a historically low-yielding market amidst the backdrop of rock-bottom interest rates and tight credit spreads. That scenario increases the allure of NUSI, which sports a robust distribution yield of 7.81%.
For more on income strategies, visit our Retirement Income Channel.