There are now officially more exchange traded funds than stocks. Every day you see a new advertisement for a new ETF and they are getting interesting. No longer do you see ETF's that are only focused on a particular industry, sector or index. They are getting so creative with what they offer. It seems that the goal now is to offer ETF's that solve problems some investors have. Some accounts have limitations as to the products they can use or the directional bets they can make. Well now when someone tells me about a limitation their account has I often respond with "there's an ETF for that you know." Today we will cover a unique offering by Wisdom Tree that affords those without short option capabilities the chance to participate.
The product we are talking about today is the Wisdom Tree CBOE S&P 500 PutWrite Strategy Fund
It has long been a strategy to sell out of the money puts on the SPX and collect the premium. The SPX is a cash settled index which means if you are wrong (your option goes in the money) you are not obligated to buy anything. You only have to return cash to the other party. I know, I know, at this point you may be saying "what?". Selling puts on the SPX is a bullish strategy that aims to profit from a move higher or sideways, but not everyone can participate in this as the margin requirements tend to be fairly high. For this, and other reasons Wisdom Tree is offering the ETF, PUTW which will do the heavy lifting for you. The funds strategy is to sell cash-secured puts on the SPX to help offset a decline in the value of the index. To put it simply, buying some of the PUTW will help hedge some of any positions you have that are tied to the S&P 500.
