Innovator Capital Management announced today the launch of the Innovator Equity Premium Income – Daily PutWrite ETF (SPUT) on the NYSE Arca. The fund has an expense ratio of 0.79%
Most option-income ETFs today use covered call strategies. SPUT, however, sells puts instead of calls. However, selling puts usually brings in higher premiums and does not limit the potential for positive returns from the portfolio’s stocks. For a put seller to receive the premium, the underlying asset’s price must hold steady or increase.
To address this, the fund’s strategy changes the strike price to adapt to movements in market data, with the intention of mitigating losses. According to Innovator, SPUT’s strategy was primarily available only to institutional investors and very wealthy individuals until now.
Demand for New Income Strategy
“We regularly hear from clients who are looking for new ways to generate income in their portfolios, especially after the disappointing bond returns of recent years,” said Innovator ETFs CIO Graham Day.
“While the income from put-writing is compelling, we think the potentially low correlation to the bond market is another feature that will have strong appeal to investors,” he added.
In addition to using an options strategy, the fund invests about half of its assets in large U.S. companies in order to benefit from the equity exposure. This part of the fund tracks the Solactive GBS United States 500 Index.
Innovator says the fund has the potential to provide additional income via the dividends paid by its equity holdings, as well as its position in U.S. T-bills and other cashlike investments. The issuer aims to distribute that income to SPUT’s shareholders monthly.
Earlier this year, Innovator rolled out the Innovator Uncapped Bitcoin 20 Floor ETF – Quarterly (QBF). QBF is a bitcoin ETF that pairs risk management with unlimited growth potential. The firm offers more than 150 ETFs and has more than $23 billion in assets spread across those funds.
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