The Nationwide Risk-Managed Income ETF (NYSEArca: NUSI) is an ideal consideration at a time when advisors and investors are struggling to source adequate retirement income. In fact, NUSI can be viewed as a new paradigm on the retirement income front.
The Nationwide Risk-Managed Income ETF will use 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.
Specifically, 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. NUSI’s downside protection in today’s environment.
“Furthermore, we see increased risk on the horizon, as we believe the stock market isn’t factoring in reduced earnings expectations due to COVID-19. Plus there’s uncertainty around the looming U.S. presidential election and tensions are escalating between the U.S. and China,” reports ThinkAdvisor.
Multiple Layers to NUSI ETF
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.
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.
Traders would typically employ a covered-call strategy when they have a neutral view of the markets over the short-term and just gather income from the option premium. While these buy-write ETFs may not produce any phenomenal price returns compared to the broader equities markets, their underlying option strategy helped them generate outsized yields.
NUSI aims for 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.
For more on income strategies, visit our Retirement Income Channel.