WisdomTree launched the WisdomTree CBOE S&P 500 PutWrite Strategy Fund (NYSE Arca: PUTW) on Wednesday, February 24, 2016.
Here is a synopsis of the new ETF:
FUND INFORMATION:
| Symbol: PUTW | Exchange: NYSE Arca |
| Name: WisdomTree CBOE S&P 500 PutWrite Strategy Fund | Νet Expense Ratio: 0.38% |
FUND OBJECTIVE:
The WisdomTree CBOE S&P 500 PutWrite Strategy Fund seeks to track the price and yield performance, before fees and expenses, of the CBOE S&P 500 PutWrite Index.
REFERENCE INDEX:
The CBOE S&P 500 PutWrite Index tracks the value of a cash-secured (i.e., collateralized) put option sales strategy, which consists of selling (or “writing”) S&P 500 Index put options (“SPX Puts”) and investing the sale proceeds in 1- and 3-month Treasury bills.
By selling a SPX Put, the Fund receives a premium from the option buyer, which increases the Fund’s return if the option is not exercised and expires worthless. If, however, the value of the S&P 500 Index falls below the SPX Put’s strike price, the option finishes “in-the-money” and the Fund pays the buyer the difference between the strike price and the value of the S&P 500 Index. The Index’s strategy (and, accordingly, the Fund’s strategy) of selling cash-secured SPX Puts serves to partially offset a decline in the value of the S&P 500 Index to the extent of the premiums received. Further, if the value of the S&P 500 Index increases beyond the amount of premiums received, Index (and Fund) returns would not be expected to increase accordingly.
All SPX Puts are standardized options traded on the Chicago Board Options Exchange (CBOE). The SPX Puts in the Index are struck at-the-money (i.e., struck at or very near the S&P 500 Index value) and are sold on a monthly basis, usually the third Friday of the month (Roll Date), which matches the expiration date of the SPX Puts. SPX Puts generally may only be exercised at the expiration date, which is referred to as a European style option. The number of SPX Puts sold by the Fund varies month to month but is limited by the amount held by the Fund in Treasury bills, the value of which is expected to equal the maximum possible loss from final settlement of the SPX Puts. At each Roll Date, any settlement loss from the expiring SPX Puts is paid from the Treasury bill investments and a new batch of at-the-money SPX Puts is sold. The revenue from their sale is added to the Treasury bill account. In March quarterly cycle months (i.e., March, June, September, and December), the 3-month Treasury bills are deemed to mature, and so the total cash available is reinvested at the 3month Treasury bill rate. In other months, the revenue from the sale of SPX Puts is invested separately at the 1-month Treasury bill rate. The Fund expects to operate in a similar manner as the foregoing Index description in seeking to track the Index.
Holdings (02/23/2016):
| SPX Index Option 03/18/16 SP: 1910 | 100% |
| Cash | 21.59% |
| US Treasury Bill 5/19/2016 | 78.41% |
Useful Links:
PUTW Home Page
ETFtrack comment:
Here is a comment from Luciano Siracusano, WisdomTree Chief Investment Strategist:
“Put writing has been used by investors for decades as a solution to potentially increase the yield and lower the volatility of equity returns over various market cycles. We’ve teamed up with the Chicago Board Options Exchange (CBOE), a leader in options investing, to provide access to an index developed with a live track record dating to 2007 that has shown lower volatility over time, relative to the S&P 500. Returns for PUTW will largely be driven by the premiums received from selling put options and also income earned on the collateral. The fund, itself, does not own stocks. Given the recent volatility in the market, we believe PUTW can be used to potentially dampen equity volatility and serve as an alternative way to generate total return in the current low-yield environment.”