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PowerShares’ S&P 500 BuyWrite ETF outperforms underlying index over first year

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Exchange-traded fund provider Invesco PowerShares Capital Management has reported that its S&P 500 BuyWrite Portfolio has outperformed the S&P 500 Index by a cumulative 7.10 per

Exchange-traded fund provider Invesco PowerShares Capital Management has reported that its S&P 500 BuyWrite Portfolio has outperformed the S&P 500 Index by a cumulative 7.10 per cent since its launch on 20 December 2007.

Over its first 12 months, the ETF saw a decline of 30.67 per cent, compared with 37.77 per cent for the underlying index.

The buy-write strategy, also called a “covered call” strategy, is an investment strategy in which an investor or adviser buys a stock or a basket of stocks and sells (“writes”) call options that cover the stock position.

This allows investors to gain income and a small cushion of protection through the sale of covered call options, in exchange for some upside potential on their stock or portfolio position.

The CBOE S&P 500 BuyWrite Index, on which the ETF is based, was originally created by the Chicago Board Options Exchange.

“In December of 2007 we launched the first ETF to make significant use of options strategies, and now, one year later, we are able to celebrate the relative outperformance it has brought its investors,” says Bruce Bond, president of Invesco PowerShares.

“We believe a buy-write strategy can be used to reduce volatility and enhance portfolio returns, and this past year’s volatility has been a boon for the S&P 500 BuyWrite Portfolio, as it has outperformed nearly every major broad US stock index.”

During 2008, the net asset value of the PowerShares S&P 500 BuyWrite Portfolio fell by 29.72 per cent, while the S&P 500 dropped by exactly 37 per cent.

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