While options income strategies can serve as a solution for investors looking for income that’s not sensitive to interest rates, these strategies have even more to offer.
All options income strategies have to contend with balancing income, participation, and defense. However, this can be challenging as these attributes are generally at odds with each other, making it important to thoroughly evaluate options-based ETFs before investing.
Invesco’s options income strategies packaged in the familiar ETF wrapper are compelling offerings. The funds are designed to navigate the struggles that all options-based ETFs contend with, and also charge well below the category average.
Under the Hood of Invesco’s Options Income Strategies
The Invesco QQQ Income Advantage ETF (QQA ), the Invesco S&P 500 Equal Weight Income Advantage ETF (RSPA ), or the Invesco MSCI EAFE Income Advantage ETF (EFAA ) provide equity exposures to core trusted indices. Since the primary focus for options income funds is not purely equities exposure, the funds do not have an active stock picking element.
Instead, the funds aim to offer exposure to these well-known indexes while also providing less volatility and attractive income. The funds seek high and consistent monthly income. This means the three options income strategies are managed to focus on consistency of yield and also market participation.
A common pitfall with option income strategies is that if the VIX spikes, yields go up. Therefore, when markets calm down again and volatility falls, the yield falls as well. To solve for this, the Invesco funds aim to offer a similar yield profile across market volatility regimes.
The portfolios are conservatively built to aid in downside risk mitigation. The funds use no leverage and are always fully covered, fully collateralized, and structurally defensive. This may reduce market volatility by 20 to 30%, making it a defensive way to add monthly income.
Finally, investors are adding income exposure without taking on any interest rate risk. The options income strategies don’t have any duration or sensitivity to Fed policy or central bank action around yields.
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