New Options ETFs From NestYield Offer Defensive Shells

The first fund is the NestYield Total Return Guard ETF (EGGS). EGGS is an actively managed fund, with a net expense ratio of 0.89%, following a waiver.

This fund offers income and share price exposure to U.S. large caps. Additionally, EGGS seeks to provide a hedge against instances of significant market downturn. 

Meanwhile, the NestYield Dynamic Income ETF (EGGY) offers a focus on higher income. Like EGGS, this fund is also actively managed, with a net expense ratio of 0.89%. 

Compared to EGGS, EGGY looks to generate a higher degree of current income. However, the fund still seeks share price exposure to U.S. large caps, along with risk mitigation during volatility. 

Both funds employ a two-pronged strategy to meet their investment goals. First, EGGS and EGGY curate a portfolio of equity securities. This is either done through direct purchasing or through synthetic exposure via options. The funds both use a quantitative approach to select between seven and 15 companies for inclusion in the portfolio. 

Afterward, EGGS and EGGY use an options strategy to generate income and mitigate risk. EGGS typically employs covered calls, out-of-the-money calls, or a combination of both, depending on market conditions. Out-of-the-money calls may also be used to help capture potential share price upside. 

EGGY, however, focuses more on a covered call strategy. The fund does not prioritize out-of-the-money calls, and as such, drives more towards pure income. 

Each fund looks to use its options strategy to hedge against potential long-term risk. To do so, EGGY and EGGS alike use long put options on the S&P 500 Index. This allows both funds to potentially blunt potential losses during periods of market downturn. 

The NestYield ETFs may also opt to hold either cash or short-term U.S. Treasuries. These securities can help provide collateral for the funds’ options plays, or simply help generate income.

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