Horizons ETFs Management (USA) has launched the Horizons S&P 500 Covered Call ETF (HSPX), an exchange-traded fund that uses a covered call strategy designed to generate additional income from the option-eligible stocks in the S&P 500.
The new ETF begins trading today on the New York Stock Exchange under the symbol HSPX.
HSPX generally seeks to provide exposure to the performance of the S&P 500 Stock Covered Call Index and will make monthly distributions of dividend and call option income. Horizons USA has an exclusive agreement with Standard & Poor’s to offer an ETF in the US based on the underlying index.
“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,” says Howard Atkinson (pictured), managing director of Horizons USA. “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.”
HSPX uses a replication strategy and invests substantially all of its total assets in same securities of the underlying index. HSPX will generally own all the securities of the S&P 500, in substantially similar weights to the index, and will sell or “write” covered call options on up to 100 per cent 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 or “writes” call options on that same asset in an attempt to generate more income (the additional income from option premium) than the asset would otherwise provide on its own from dividends or other distributions. The covered call strategy is used by the underlying index in an attempt to generate additional monthly income on the S&P 500.
Historically, during bear markets, range-bound markets and modest bull markets, covered call strategies generally have outperformed their underlying securities. During strong bull markets, when the underlying securities may frequently rise through their strike prices, covered call strategies historically have tended to lag. During these strong bull markets, however, investors would still generally have earned some capital appreciation on the stock positions, together with dividends and the option premiums from writing the covered calls.
“Our team has more than two decades of experience overseeing covered call investment vehicles,” says Atkinson. “The Horizons S&P 500 Covered Call ETF offers multiple security covered call execution to individual investors through the low-cost, convenient structure of an ETF.”
Horizons USA serves as sub-adviser to HSPX. Exchange Traded Concepts has listed HSPX on the NYSE Arca under its passive exemptive relief and also serves as its adviser. Foreside Fund Services facilitates distribution of HSPX. Citibank and Citi Fund Services Ohio serve as custodian and administrator, respectively.
In addition, Adam Felesky has been appointed head of Americas for the Horizons ETFs businesses across the US, Canada and Latin America.
Felesky is chief executive officer of Horizons ETFs Management (Canada). He founded Horizons Canada in 2005 and oversaw the launch of the first two Horizons ETFs. Over the next five years, he oversaw the launch of more than 70 additional ETFs. Felesky also acts as CEO and director of all Horizons Canada’s operating subsidiaries. He is currently a member of the Ontario Securities Commission – Investment Funds Product Advisory Committee and a member of the Young Presidents Organization.
