Fixed-income investors are currently faced with a stubbornly low-yield environment with no end in sight. Many have increasingly sought out alternatives to traditional bond investments to generate more income, but many attractive yield options typically come with their own set of risks.
In the upcoming webcast, Generating Income and Managing Risk in Today’s Market, Mike Spangler, President, Nationwide Funds; Mark Hackett, Chief of Investment Research, Nationwide; and Jonathan Molchan, Executive Director and Portfolio Manager, Harvest Volatility Management, will explain the struggles of yield generation in a low-rate environment and outline a new risk-managed income strategy that could generate higher income relative to traditional income-focused investments.
Nationwide recently launched the Nationwide Risk-Managed Income ETF (NYSEArca: NUSI) to help investors target high current income with less risk relative to traditional income-focused investments. The fund strategy seeks to provide some downside protection while maintaining upside potential. Harvest Volatility Management sub-advises the fund.
The Nationwide Risk-Managed Income ETF 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.
A covered call refers to an options strategy where an investor writes or sells a call option on an asset which they already own or bought on a share-for-share basis to generate income via premiums derived from the sale of the call options.
A protective put is an options strategy where an investor purchases a put option on an asset which they already own or bought on a share-for-share basis to limit potential losses. The protective put will cause profits derived from the strategy to be reduced by the premium paid for the put, but it limits the maximum potential losses.
The ETF will try to achieve high monthly income generation, portfolio volatility reduction, reduced duration risk, and interest rate sensitivity, capital appreciation from equity participation, downside risk mitigation and enhanced tax efficiency of index options.
Financial advisors who are interested in learning more about income and managing risk can register for the Tuesday, April 7 webcast here.