The stock market bulls have eased their foot off the gas pedal this week as a flurry of data and Fed minutes have reignited investors’ worries surrounding the inevitable taper. Amid the tug-of-war on Wall Street and fear of rising rates, newcomer Horizons expanded its product lineup with a one-of-a-kind offering aimed at income investors who wish to target the financial sector with an options strategy twist [see 101 High Yielding ETFs For Every Dividend Investor].
Under The Hood: S&P Financial Select Sector Covered Call ETF (HFIN)
Horizons launched the S&P Financial Select Sector Covered Call ETF at the start of this week on Monday, November 18th. As the issuer’s second ETF, HFIN bears a striking resemblance to its first offering, the Horizons S&P 500 Covered Call ETF (HSPX, B+). Both funds employ a covered call strategy, which essentially reduces downside volatility during unfavorable market conditions.
HFIN works by holding a long position in the S&P Financial Select Sector Index while simultaneously writing call options every month; the result is a strategy designed to generate additional income while still offering exposure to capital appreciation [see our Cheapskate Hedge Fund ETFdb Portfolio].
To learn more about how the covered call strategy works, please refer to our guide: ETF Covered Call Options Strategy Explained.
Meet The Covered Call ETF Competition
The new HFIN charges 0.70% in annual expense fees and has no direct competitors seeing as how it’s currently the only ETF in the Long-Short Category that targets Financial Equities with a covered call strategy. There are, however, more established funds out there employing the covered call strategy to a broader index, including:
- PowerShares S&P 500 BuyWrite Portoflio (PBP, A-) which has $194 million in assets under management
- AdvisorShares STAR Global Buy-Write ETF (VEGA, C+) which has over $23 million in AUM
HFIN from Horizons warrants a closer look under the hood from anyone looking to put idle cash to work in the stock market while still enjoying a stream of income.
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Disclosure: No positions at time of writing.