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Horizons Launches S&P 500 Covered-Call ETF

WisdomTree rolls out two more currency-hedged single-country ETFs including a small-cap version of DXJ; ALPS debuts an international "dividend dogs" fund; a new Israel ETF from Van Eck.

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On June 24, Canadian ETF provider Horizons tapped the services of Exchange Traded Concepts to roll out its first United States exchange-traded fund, Horizons S&P 500 Covered Call ETF (HSPX), a passively managed fund that holds the S&P 500 Index and utilizes a covered-call overlay.

HSPX holds the S&P 500 stocks and writes covered calls on options-eligible constituents. The covered-call options are written out-of-the-money, and the strike prices are selected based on respective stocks' implied volatility. The appeal of a covered-call strategy is that it can offer added income on top of S&P 500 stocks' dividend payments while dampening volatility. And the appeal of a covered-call strategy in an ETF wrapper is that the ETF issuer can write the call options on the individual stocks rather than an individual investor needing to undertake what can be a time-consuming, complex, and expensive call-writing process. Horizons is no stranger to covered-call strategies; the firm offers 12 covered-call ETFs in Canada with combined assets of roughly $500 million.

Robert Goldsborough does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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