Tag Archives: option overlay

ETF News, Strike Price

Credit Suisse Lists Covered-Call Gold ETN; $GLDI w Exposure to $GLD

Leave a comment

indexuniverseCourtesy of Cinthia Murphy and Olly Ludwig

Credit Suisse on Tuesday launched its Credit Suisse Gold Shares Covered Call ETN (NasdaqGM: GLDI), a strategy that provides long exposure to physical gold coupled with an overlay of call options.

The ETN, comes with an annual expense ratio of 0.65 percent, will have notional exposure to the bullion ETF SPDR Gold Shares (NYSEArca: GLD) while notionally selling monthly “out of the money” call options, the fund’s prospectus said.

The strategy is designed to enhance current cash flow through premiums on the sale of the call options. Those premiums will be received monthly in exchange for giving up any gains beyond 3 percent a month. In other words, the premiums would soften the blow if GLD were to face a sell-off, but that’s the extent of the fund’s downside protection.

There’s still growing uncertainty in the market on whether the 12-year-long gold rally has run its course, which makes Credit Suisse’s launch of GLDI timely, as the ETN represents a somewhat neutral view on gold.

ETNs are senior unsecured obligations; in this case, of Credit Suisse’s Nassau branch. Unlike ETFs, they have no tracking error, but, also unlike ETFs, they represent a credit risk. For example, if Credit Suisse ever faced bankruptcy, holders of GLDI would likely lose their entire investment.

ETF News, Strike Price

Institutional Investors Increase Use of ETFs, says Greenwich Associates

Leave a comment

At first used by Institutional Investors for manager transitions, rebalancing and other tactics, fund managers strategic use of ETFs are on the rise, in particular to gain long-term exposure to desired asset classes, according to a freshly-published study by Greenwich Associates.

In the hot-off-the press study, “57% of institutional ETF users employ these products to achieve strategic allocation ranges, while 20% of institutional funds use ETFs for tactical purposes to achieve alpha, as do 38% of asset managers using these products.”

The study also concluded that “once institutions integrate ETFs into their manager transition or cash equitization processes, they relatively quickly begin seeing additional applications for the products.”  Of equal note, holding periods of ETFs by institutional fund and other asset managers is on the rise, according to the study.

Noted Chris Hempstead, head of ETF Execution for WallachBeth Capital, “The Greenwich study does a good job of confirming what we’re seeing and hearing from clients; more tactical applications, and those that have longer-hold horizons are adding an options overlay element to their strategies so as to cushion volatility and enhance overall alpha.”

For the full report, greenwich associates – strategic uses for etfs