These days, it’s common for investors to be looking for two things: a low risk profile and more income. The Nationwide Risk-Managed Income ETF (NYSEArca: NUSI) is one of a few ETFs that can deliver on both objectives.
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 avoids some of the current dividend risks with the S&P 500 because the Nationwide ETF is an income-generating spin on the Nasdaq-100 Index (NDX), an index lightly allocated dividend-offending sectors, such as energy and real estate.
“The Nationwide Risk-Managed Income ETF is a low-risk fund that can be deployed by a wide array of investors, including retirement planners, due to its juicy yield and hedging mechanism,” reports InvestorPlace.
NUSI: Right for the Times
The recent market swings show that the aging bull market rally is susceptible to sudden extreme bouts of volatility. Nevertheless, investors who are worried about further risks may turn to alternative strategies that exhibit lower correlations to traditional assets. This includes ETFs that track buy-write or covered call strategies to generate attractive yields if markets continue to slowdown in the year ahead.
“A simple though accurate view of NUSI is that it’s a low volatility, higher income alternative to the popular though low-yielding NASDAQ-100 Index,” according to InvestorPlace. “Simplifying the low-risk fund’s strategy, it sells covered call options on that index to generate income. However, NUSI doesn’t stop there. It buys protective puts with some of the covered call proceeds, meaning there’s a bit of a buffer for NUSI investors should the likes of Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT) retreat.”
Covered call strategies can potentially augment a portfolio during periods of heightened volatility. The covered-call options allow an investor to hold a long position in an asset while simultaneously writing, or selling, call options on the same asset.
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.
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.