← Back

Option Trading ETFs

There are 38 ETFs that use option trading as an investment strategy.

Strategy	Count
Broad	15
Covered calls	17
Puts	6
Total	38

The "broad" strategy means that the ETF can or is using both put writing and covered calls.

Covered calls

A “covered call” is an income-producing strategy where you sell, or “write”, call options against shares of stock you already own. Typically, you’ll sell one contract for every 100 shares of stock. In exchange for selling the call options, you collect an option premium. But that premium comes with an obligation. If the call option you sold is exercised by the buyer, you may be obligated to deliver your shares of the underlying stock. Fortunately, you already own the underlying stock, so your potential obligation is “covered” – hence this strategy’s name, “covered call” writing.

Here are the ETFs that use covered call writing as a strategy, if you want to read some examples of the approaches taken by these ETFs:

Name	Symbol	Last price	Currency
APTUS COLLARED INC OPP ETF	BATS:ACIO	40.48	USD
GLOBAL X RUSSELL 2000 COV CL	ARCX:RYLD	16.42	USD
Credit Suisse X-Links Crude Oil Shares Covered Call ETN	XNAS:USOI	64.00	USD
Global X Nasdaq 100 Covered Call & Growth ETF	XNAS:QYLG	33.60	USD
Star Global Buy-Write	ARCX:VEGA	44.02	USD
Recon Capital NASDAQ-100 Covered Call ET	XNAS:QYLD	18.55	USD
Global X S&P 500 Covered Call & Growth ETF	ARCX:XYLG	33.08	USD
Global X Funds Global X S&P 500 Risk Managed Income ETF	ARCX:XRMI	19.40	USD
Amplify YieldShares CWP Dividend & Option Income USD	ARCX:DIVO	40.66	USD
Invesco S&P 500 BuyWrite ETF	XNYS:PBP	23.73	USD
First Trust BuyWrite Income ETF	XNAS:FTHI	23.37	USD
Credit Suisse X-Links Gold Shares Covered Call ETNs due February 2, 2033	XNAS:GLDI	153.61	USD
Global X Funds Global X Dow 30 Covered Call ETF	ARCX:DJIA	23.45	USD
Horizons S&P 500 Covered Call	ARCX:XYLD	43.00	USD
Credit Suisse X-Links Silver Shares Covered Call ETNs due April 21, 2033	XNAS:SLVO	74.60	USD
ETC 6 Meridian Hedged Equity Index Option ETF	ARCX:SIXH	36.73	USD
FT Cboe Vest S&P 500 Dividend Aristocrats Target Income ETF	BATS:KNG	50.50	USD

ETFs that are using a covered call strategy often have a high dividend yield, because of the income generated through selling the call options. But the income isn't "real", because you earn the dividend income at the expense of the ETF not tracking the underlying asset. So to properly analyze a covered call ETF, you have to look at the total return of the ETF, not just the market price.

Let's look at an example. GLDI, the X-Links Gold Shares Covered Call ETN, tracks QGLDI, the Credit Suisse NASDAQ Gold FLOWS (Formula-Linked OverWrite Strategy) 103 Index (the “Index”). The Index seeks to implement a “covered call” investment strategy by maintaining a notional long position in shares of GLD, the SPDR Gold Trust ETF while notionally selling monthly out-of-the-money call options on that position. GLDI has a really high dividend yield, but the market price of GLDI has significantly trailed the market price of GLD, the SPDR Gold Trust ETF.

Even though GLDI has a high dividend yield, if you look at GLDI's total return index (QGLDITR), you can see that the high dividend yield didn't really help your overall return, as you would have been just as well off owning GLD, the SPDR Gold Trust.

Cash secured put writing

An investor who employs a cash-secured put writes a put contract, and at the same time deposits in his brokerage account the full cash amount for a possible purchase of underlying shares. The purpose of depositing this cash is to ensure that it's available should the investor be assigned on the short put position and be obligated to purchase shares at the put's strike price. While the cash is on deposit it may generally be invested in short-term, interest-bearing instruments.

When an investor writes or sales a put contract, the investor agrees to buy a stock during a specified period of time at a fixed price, called a strike price. The strike price is below the stock's current market price, so the investor writing a put contract is telling the buyer of the put: "if this stock drops in value, I will buy it from you, and I will pay X dollars for it". Regardless of the direction the stock price takes after the put is sold, or whether assignment is received or not, the put seller keeps the premium.

On the downside, the break-even point for this strategy is an underlying stock price equal to the put's strike price less the premium received for selling it. If the stock declines significantly below the strike price by expiration, on assignment the investor may be obligated to purchase shares well above their current price level. Stock bought under this circumstance may therefore reflect a loss compared to its market price at the time. However, this loss would be unrealized as long as the investor holds the shares and is positioned to profit from an increase in their price. Any investor whose motivation in writing a cash-secured put is to buy underlying stock should therefore be committed in advance to a target price for a possible purchase, and select a strike price accordingly.

On the upside the risk is one of opportunity loss. After selling the put the underlying stock price can go up and remain above the put's strike price. In this case, neither a put seller who is not assigned, nor an investor who originally entered a low limit order for the stock instead, will buy the stock. The put seller, however, keeps the put sale premium received.

Here are the ETFs that use put writing as a strategy, if you want to read some examples of the approaches taken by these ETFs:

Name	Symbol	Last price	Currency
Cambria Tail Risk	BATS:TAIL	11.26	USD
Cambria Sovereign Bond ETF	BATS:FAIL	16.26	USD
Global X NASDAQ 100 Tail Risk ETF	XNAS:QTR	32.37	USD
EA Series Trust Alpha Architect Tail Risk ETF	BATS:CAOS	87.36	USD
Global X Funds Global X S&P 500 Tail Risk ETF	ARCX:XTR	32.90	USD
WisdomTree CBOE S&P 500 PutWrit	ARCX:PUTW	33.63	USD

ETFs that use both strategies

Here are the ETFs that use both put writing and covered call writing as a strategy, if you want to read some examples of the approaches taken by these ETFs:

Name	Symbol	Last price	Currency
ZEGA Buy and Hedge ETF	ARCX:ZHDG	20.89	USD
Quadratic Deflation ETF	ARCX:BNDD	13.76	USD
Swan Hedged Equity US Large Cap ETF	BATS:HEGD	22.67	USD
Global X Funds Global X S&P 500 Collar 95-110 ETF	ARCX:XCLR	33.15	USD
CORE ALTERNATIVE ETF	ARCX:CCOR	25.60	USD
Overlay Shares Hedged Large Cap Equity ETF	ARCX:OVLH	34.64	USD
JPMorgan Equity Premium Income ETF	ARCX:JEPI	58.20	USD
Amplify BlackSwan ISWN ETF	ARCX:ISWN	18.28	USD
Simplify Exchange Traded Funds Simplify US Equity PLUS Upside Convexity ETF	ARCX:SPUC	41.53	USD
WisdomTree Target Range Fund	XNAS:GTR	24.09	USD
Simplify Exchange Traded Funds Simplify US Equity PLUS Convexity ETF	ARCX:SPYC	37.87	USD
NATIONWIDE RISK-MANAGED INCO	ARCX:NUSI	26.44	USD
Amplify BlackSwan Growth & Treasury Core ETF	ARCX:SWAN	30.00	USD
Amplify ETF Trust Amplify BlackSwan Tech & Treasury ETF	ARCX:QSWN	22.21	USD
Simplify Exchange Traded Funds Simplify US Equity PLUS Downside Convexity ETF	ARCX:SPD	33.97	USD