Credit Suisse issues covered call strategy ETN on iShares Silver ETF

Apr 18th, 2013 | By | Category: Alternatives / Multi-Asset

Credit Suisse has added to its range of innovative exchange-traded notes (ETNs) with the launch of the Credit Suisse Silver Shares Covered Call ETN (SLVO), an ETN providing exposure to a covered call strategy on iShares Silver ETF (SLV).

Credit Suisse issues iShares Silver ETF Covered Call ETN

The Credit Suisse Silver Shares Covered Call ETN has been listed on the Nasdaq Stock Market.

The new product, which is designed to pay out variable monthly coupons, is the second precious metals covered call strategy launched by Credit Suisse and follows the January launch of GLDI, an ETN tracking a similar strategy on gold.

Listed on the Nasdaq Stock Market, the ETN becomes the first exchange-traded product (ETP) in the US to offer investors access to a covered call strategy on a silver investment.

The ETN is linked to the Credit Suisse Nasdaq Silver FLOWS 106 Index. FLOWS stands for Formula-Linked OverWrite Strategy. The index seeks to implement a rolling covered call investment strategy by maintaining a notional long position in shares of the iShares Silver ETF while notionally selling monthly out-of-the-money call options on that position.

Holders of SLVO will be entitled to receive variable monthly payments based on the notional option premiums received from the sale of the covered call options each month.

Greg King, head of ETPs at Credit Suisse, said: “Precious metals investments do not typically provide any current income. For the GLDI and SLVO ETNs however, this is not the case. Covered call strategies are designed to enhance yield in exchange for sacrificing part of the upside of an investment position. Both SLVO and GLDI seek to provide investors and their advisors with interesting new ways to introduce monthly cash flows into their portfolios while maintaining some exposure to precious metals.”

Credit Suisse partnered with Nasdaq OMX in creating the FLOWS suite of indices that the ETN tracks.

Robert Hughes, Vice President at Nasdaq OMX Global Indexes, said: “As a global index provider, we are pleased to have helped create another index that is the basis of the first ETN to offer investors access to a covered call strategy on a silver investment.”

He added: ” Nasdaq OMX and Credit Suisse share a common goal of helping investors meet their investment objectives and we look forward to exploring other ways to provide them with additional investment opportunities.”

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