After a tumultuous trading day in Asian and European markets, U.S. markets opened to pronounced volatility on Monday. With the S&P 500 and Nasdaq at or near bear territory, investors looking to earn income and trim equity losses would do well to consider the Neuberger Berman Option Strategy ETF (NBOS ).
The Nasdaq Composite entered bear territory last week (down 20% from its 52-week high). The crash in equities followed after the announcement of sweeping 10% tariffs on all imports, and higher tariffs for approximately60 specific countries. The S&P 500 currently hovers near bear territory as of mid-day Monday trading (April 7, 2025).
Advisors and investors looking to earn income in a tumultuous market environment, as well as potentially mitigating drawdowns should look to NBOS. The fund currently outperforms the S&P 500 YTD on a total returns basis as of April 4, 2025.
Income and Downside Mitigation in the S&P 500
The strategy underpinning the Neuberger Berman Option Strategy ETF (NBOS) seeks to underwrite equity risk in markets, generating yield from option premiums and underlying collateral holdings. NBOS writes put options on the S&P 500 and other indexes within the family of S&P 500 indexes, and on ETFs. Put options protect the buyer from loss should the underlying asset’s price fall below the strike price of the put. As a put writer, the fund benefits when the put option expires with the underlying price above or at the strike price. When it expires below and the put is exercised, the fund still benefits from the premiums earned.
Alongside options, NBOS also invests in short-term Treasuries as a source of income. This allows investors to harness two sources of returns through a single strategy without increasing their equity beta or credit exposures, or taking on additional interest rate risk.
It’s expected to outperform in flat or declining markets, while lagging but still capturing some upside in rising markets. The strategy also seeks to increase income potential through options premiums, which benefit from market volatility.
The ETF managers consider overall market volatility, underlying valuations, and risks when writing put options. The aggregative investment exposure of the options written will typically equal 100% of NBOS’ assets. Sometimes that may be greater, but won’t exceed 125%.
NBOS collateralizes its options using a portfolio of laddered, investment-grade bonds, mostly short-term. The fund invests primarily in Treasuries. However, it can invest in government agency bonds, corporate bonds, mortgage- and asset-backed securities, structured notes, and cash or cash equivalents.
In addition to purchasing put options, the fund may invest in or write call options. NBOS carries a net expense ratio of 0.56%.
For more news, information, and analysis, visit the Invest Beyond Cash Channel.
