UBS Asset Management has launched four equity ETFs offering put or call options on US and European stocks.
Listed on the SIX Swiss Exchange, the UBS ETF US Equity Defensive Put Write SF UCITS ETF (SPXPW) and the UBS ETF US Equity Defensive Covered Call SF UCITS ETF (SPXCC) have total expense ratios of 0.29%.
The UBS ETF Euro Equity Defensive Put Write SF UCITS ETF (E50PW) and the UBS ETF Euro Equity Defensive Covered Call SF UCITS ETF (E50CC) have total expense ratios of 0.26%.
SPXPW and SPXCC offer a put write strategy and a covered call strategy, respectively, for the S&P 500 index.
E50PW and E50CC offer similar strategies for the Euro Stoxx 50 index.
Product Panel: UBS AM’s equity options ETFs
The covered call combines a long position in the target index with weekly selling of call options. This aims to generate returns through income from premiums and reduce downside risk.
The put write strategy combines a cash exposure with weekly selling of put options with the aim of generating an income from premiums while providing a cushion during market downturns.
Selling options can generate income through the premiums received while reducing the volatility and drawdowns compared to a pure equity position.
This is a more defensive strategy compared to long equity exposures as investors will have to sacrifice part of the potential equity index upside in exchange for the reduced downside risk.
UBS AM converts ETFs to Clearstream’s ICSDplus model
Clemens Reuter, head of ETF and passive investment specialists at UBS AM, said: "Equity markets have been volatile over time and, as a result, may expose investors to significant downside risk.
“Systematically selling options on major stock indices is a way to generate income, reduce downside risk and benefit from that volatility.”
