Horizons debuts in US with S&P 500 covered call strategy ETF

Jun 28th, 2013 | By | Category: Alternatives / Multi-Asset

Horizons USA, a member of the Horizons ETFs Group, which in turn is part of Mirae Asset Global Investments, has launched its first exchange-traded fund (ETF) in the United States. The launch expands Horizons’ international reach, which now includes operations in Canada, South Korea, Hong Kong and Australia.

Horizons debuts in US with S&P 500 covered call strategy ETF

Horizons has made its debut in the US with the launch of an S&P 500 covered call strategy ETF on the NYSE Arca.

The firm’s debut US product, the Horizons S&P 500 Covered Call ETF (HSPX), seeks to track the S&P 500 Stock Covered Call Index, a specialist strategy index which provides exposure to the S&P 500 Index while also generating additional income through the sale of call options.

The fund works by generally owning all the securities of the S&P 500 in substantially similar weights to the index and selling (or writing) covered call options on up to 100% of each of the option eligible securities in the portfolio.

A covered call is an options strategy whereby an investor holds a long position in an asset and sells call options on that same asset in an attempt to generate more income – in the form of option premiums – than the asset would otherwise provide on its own from dividends or other distributions.

Historically, during bear markets, range-bound markets and modest bull markets, covered call strategies have outperformed their underlying securities. During strong bull markets, however, when the underlying securities may frequently rise through their strike prices, covered call strategies historically have tended to lag.

Howard Atkinson, Managing Director of Horizons USA, said: “The Horizons S&P 500 Covered Call ETF attempts to generate additional monthly income for investors while lowering the volatility of returns versus the S&P 500.”

He added: “We’re pleased to be bringing to market the first covered call ETF strategy that seeks to write on all eligible individual stocks in the S&P 500 as it answers a growing need for maintaining regular income streams in a persistent low-interest-rate and shrinking-yield environment.”

The fund, which has come to market via Exchange Traded Concepts’ turnkey private-label solution, is listed on the NYSE Arca and comes with a management fee of 0.65%.

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