Examining The Options In the Buy/Write ETF Space (PBP)

From time to time we have covered the “Buy/Write” strategies that populate the U.S. listed ETF landscape, which typically attract investors whom are looking to supplement their income above and beyond exposure to a long index position with the selling of call options.

Oftentimes, it seems like these investors would rather employ a systematic, managed approach such as those found in the ETFs we will profile today instead of taking the responsibility of writing call options against long equity positions into their own hands.

Today’s action in the out-of-the-money December 265 calls in SPY (SPDR S&P 500, Expense Ratio 0.09%), which we speak about in our ETF/Index options recap, actually spurred this piece today. The largest offering in the space is the $335 million PBP (PowerShares S&P 500 BuyWrite Portfolio, Expense Ratio 0.75%) which has attracted modest inflows year-to-date to the tune of about $35 million.

Fund literature states “The Index measures the total rate of return of an S&P 500 covered call strategy. This strategy consists of holding a long position indexed to the S&P 500 Index and selling a succession of covered call options, each with an exercise price at or above the prevailing price level of the S&P 500 Index.”

Other funds in this segment of note include the following: QYLD (Horizons NASDAQ-100 Covered Call, Expense Ratio 0.60%, $166 million in AUM), CCOR (Cambria Core Equity, Expense Ratio 1.05%, $120 million in AUM), and HSPX (Horizons S&P 500 Covered Call, Expense Ratio 0.65%).

PBP-2017-11-20

The PowerShares S&P 500 BuyWrite Portfolio (PBP) was trading at $22.53 per share on Monday afternoon, down $0.46 (-2.00%). Year-to-date, PBP has gained 8.17%, versus a 16.64% rise in the benchmark S&P 500 index during the same period.

PBP currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #35 of 136 ETFs in the Large Cap Blend ETFs category.


Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.