Investors fortunate enough to have access to defined contribution may still have retirement income needs in retirement and the Nationwide Risk-Managed Income ETF (NUSI) is a prime ETF for plugging those gaps.
NUSI is an actively managed portfolio of stocks included in the Nasdaq-100 Index and an options collar. Per index rules, the fund only invests in the top 100 largest by market cap, nonfinancial stocks listed on NASDAQ. A collar strategy involves selling or writing call options and buying put options, thus generating income to hedge some downside risk. The strategy seeks to generate high current income monthly from any dividends received from the underlying stock and the option premiums retained.
“Two trends seem to dominate media reports on defined contribution (DC) plans’ efforts to offer participants retirement income,” reports WealthManagement.com. “The first trend is that employers have been hesitant to adopt retirement income, but progress, albeit slow progress, is being made. The second trend is product-focused, with financial services firms rolling out new solutions.”
Plugging Gaps With NUSI
NUSI uses an options trading strategy called a protective net-credit collar to generate income. The options strategy sells an upside call option and uses a portion of the proceeds received to buy a put option to hedge downside risk on an underlying portfolio of securities. The March 2020 market swoon highlights the advantages of NUSI.
NUSI can act as a complement to traditional equity and fixed income allocations or as the ideal protective hedge for investors with heavy exposure to technology and growth stocks because the fund is a “rules-based options trading strategy that seeks to produce high income using the Nasdaq-100 Index,” according to Nationwide.
The Nationwide Risk-Managed Income ETF will use an options trading strategy called a protective net-credit collar to generate income. The options strategy sells an upside call option and uses a portion of the proceeds received to buy a put option to hedge downside risk on an underlying portfolio of securities.
Covered call strategies can potentially augment a portfolio during periods of heightened volatility. The covered-call options allow an investor to hold a long position in an asset while simultaneously writing, or selling, call options on the same asset.
NUSI aims for high monthly income generation, portfolio volatility reduction, reduced duration risk, and interest rate sensitivity, capital appreciation from equity participation, downside risk mitigation and enhanced tax efficiency of index options.