The coronavirus pandemic has pinched retirement savers and retirees, underscoring the advantages of alternative strategies like the Nationwide Risk-Managed Income ETF (NYSEArca: NUSI).
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.
“Even before the pandemic, 19% of workers didn’t know when they would retire, and 9% said they never expect to retire. In order to change this, almost all workers and retirees agree — along with 88% of plan sponsors — that it is important for retirees to have a source of guaranteed income they cannot outlive, according to MetLife’s study,” reports Employee Benefits Adviser.
The NUSI ETF Helps Offset Retirement Uncertainty
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.
“Stock market volatility has always been a primary concern among aging employees who worry that economic unpredictability could jeopardize their retirement savings,” according to Employee Benefits Adviser. “In fact, according to MetLife’s study, prior to the pandemic, more than two in five workers were already either cautious (35% with their investments or avoided risk altogether (9%). Today, these fears and hesitations likely have been heightened as COVID-19 sparked widespread volatility across the market and has had significant impacts on workers’ retirement savings.”
The Nationwide Risk-Managed Income ETF incorporates options exposure to help generate income and mitigate risk as a way to enhance total returns. Investors have long capitalized on covered call options strategies for income generation, or protective put options strategies to protect against and limit losses.
NUSI uses an options trading strategy called a protective net-credit collar to generate income. The options strategy sells an upside call option and uses a portion of the proceeds received to buy a put option to hedge downside risk on an underlying portfolio of securities.
For more on income strategies, visit our Retirement Income Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.