In a challenging income environment, sometimes a refreshed view of yield can make all the difference and the Nationwide Risk-Managed Income ETF (NYSEArca: NUSI) can be a difference-maker for income-hungry investors.
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.
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.
In a recent note, Jefferies said the search for yield is poised to rebound. With a distribution yield of 7.81%, NUSI is positioned to benefit from that trend.
Adding to the case for NUSI is the sturdiness of some of the sectors the Nasdaq-100 Index is heavily allocated to.
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.
“The concept of an asset that can provide capital appreciation while still providing distributions above cash rates will always remain a theme for all seasons,” according to Jefferies.
That all seasons approach can be attained with NUSI because the fund doesn’t subject investors to the possibility of negative dividend action.
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.
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.