The evolving investment landscape in 2026 is being defined by a search for new defensive tools and income. That said, more investors and financial advisors are turning to options-based strategies to address these factors.
At ETF Exchange 2026, TMX VettaFi caught up with Craig Ebeling, Head of ETF Strategists at Fidelity Investments, to discuss options-based ETFs. He explained that the rise in adoption can originate from two needs: volatility protection and income. Both are ideal in the current market environment. Ebeling also noted that there’s a strong case for fixed income and advisors seeking other ways to accomplish different goals through outcome-based investing.
3 Options-Based Funds
As options-based strategies are nuanced and complex, they are best left for the experts. Ebeling is one such expert, and he staunchly supports the active wrapper for three of Fidelity’s options-based funds. He also added that systematic, once-a-month rebalancing can leave investors exposed when markets shift rapidly.
“If you’re performing a systematic rebalance, you’re missing out on an opportunity to readjust your risk exposure and take gains with your options if needed,” Ebeling warned. “I think having an active portfolio manager overseeing that on a daily basis is important and can lead to potentially good results.”
Fidelity offers three distinct ETFs with options overlays:
- Fidelity Hedged Equity ETF (FHEQ ): With an expense ratio of 48 basis points, FHEQ offers downside protection while also providing participation when equity markets trend higher. As Ebeling explained, FHEQ provides “core market equity exposure, but you’re getting downside protection through basically two put ladders… we’re giving you that without using calls to fund the puts. So you participate in the upside of the market, minus the cost of the puts.”
- Fidelity Dynamic Buffered Equity ETF (FBUF ): Also at 48 basis points, FBUF uses a “defensive options collar” strategy that involves purchasing index options to provide downside protection while selling index call options for income to offset the cost of that protection. Ebeling also explained that FBUF can be used as a volatility dampener. Where, “if you think the market’s going to be sideways and choppy, use a buffer strategy (in FBUF).”
- Fidelity Yield Enhanced ETF (FYEE ): As more investors seek equity-income diversification, FYEE offers a solution, allowing them to remain in equity markets without adding credit or duration risk. At 32 basis points – currently waived on the first $250 million of the fund’s assets (after that, a blended rate will apply) through August 31, 2026 – the fund employs a dynamic call option-selling strategy designed to provide income.
Fidelity’s Scale & Brand Cachet
In a crowded field of ETF issuers, it’s becoming increasingly difficult for providers to distinguish themselves from the masses. However, Ebeling points to Fidelity’s infrastructure and brand cachet as key differentiators.
“It’s important working with trusted asset managers that have the people, the infrastructure, the technology, and the know-how to manage not only options, but ETFs and active mutual funds,” said Ebeling.
Moreover, Fidelity doesn’t release products to see what sticks. They listen to the most important source of feedback: their clients.
“When we launch something, it’s typically: What are our clients asking for? Can we do it well? Can we do it competitively in the market or better than what we think is out there?” Ebeling added.
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Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.
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