Horizons Files For A Russell 2000 Covered Call ETF

ETF issuer Horizons has just filed for its third ETF that concentrates on a covered-call strategy within the options market.

The Horizons Russell 2000 Covered Call ETF joins its two existing covered-call Horizons funds, which are tied to the S&P 500 Index and the Nasdaq 100 Index, respectively.

According to the SEC filing, the new ETF will feature an expense ratio of 0.70% and track the CBOE Russell 2000 30-Delta BuyWrite Index. The fund’s benchmark is geared to track the performance of a portfolio of stocks replicating the small-cap Russell 2000 Index, and a strategy that sells one-month out-of-the-money covered-call options on the same index, according to its prospectus.

The existing Horizons NASDAQ-100 Covered Call ETF (QYLD) was launched back in 2013, has gathered around $92 million in assets under management since its inception. QYLD offers a lower expense ratio of 0.60% versus the new Russell 2000 Coverered Call ETF.

Horizons’ other similar fund, the S&P 500 Covered Call ETF (HSPX), also launched in 2013, sports about $58 million in assets, and an expense ratio right in the middle of the two other funds at 0.65%.

Covered calls are a fairly popular options strategy that’s usually used as a type of insurance to protect against downside. Of course, insurance comes at a cost, and does place some limits on potential upside as well. Some options experts prefer a different strategy of cash-based put selling instead to achieve the same end.

The Horizons NASDAQ-100 Covered Call ETF (NASDAQ:QYLD) was trading at $23.83 per share on Thursday morning, up $0.10 (+0.42%). Year-to-date, QYLD has gained 6.62%, versus a 8.97% rise in the benchmark S&P 500 index during the same period.

QYLD currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #51 of 111 ETFs in the Large Cap Blend ETFs category.