Index-based ETF strategies with sale (writing) of put options do not distinguish conceptually from covered calls with the aim "to generate income" by targeting a premium and rolling exposure on a regular basis
The risk premium is earned by the put seller taking on volatility from the option buyer
Consequently, put-writing strategies will have a favorable outcome in less volatile, sideways moving markets, when the option-leg expires without hitting the strike price
Performance of put-writing ETFs is focused on the volatility risk premium rewarding the option sale - complemented by a cash collateral invested in very short term Treasury bills
- Option-writing - in terms of option selection (depending on volatility levels and valuations) and roll-over periodicity - may set the expertise of some fund managers apart
Less popular than covered calls ETFs, put-writing strategies may benefit from a less 'crowded' trade, avoiding the potential undervaluation of the call options
The limited price data set of Neuberger Berman Option Strategy ETF
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