Global X ETFs, the New York-based provider of exchange traded funds (ETFs), announced the launch of three pairs of ETFs that employ options-based strategies in an effort to help investors achieve specific outcomes, such as generating income in a low yield environment and managing downside risks amid bouts of elevated volatility. Each pair of funds includes both a Nasdaq 100 and S&P 500 Index-based version.
| Fund Name | Ticker | Strategy Overview* |
| Global X Nasdaq 100® Risk Managed Income ETF | QRMI | Net Credit Collar: Owns the stocks in the reference index, while selling monthly at-the-money call options (which have a strike price the same as the current market price of an underlying security) to seek to generate income, and buying monthly 5% out-of-the-money protective puts (which have a strike price lower than the current market price of an underlying security) to seek to mitigate downside risks. |
| Global X S&P 500® Risk Managed Income ETF | XRMI | |
| Global X Nasdaq 100® Tail Risk ETF | QTR | Protective Put: Owns the stocks in the reference index, while buying three month 10% out-of-the-money put options to seek to offer upside potential and mitigate downside risks. |
| Global X S&P 500® Tail Risk ETF | XTR | |
| Global X Nasdaq 100® Collar 95-110 ETF | QCLR | Asymmetric Collar: Owns the stocks in the reference index, while selling three month 10% out-of-the-money call options and buying three month 5% out-of-the-money put options to offer a measure of upside potential, while mitigating downside risks. |
| Global X S&P 500® Collar 95-110 ETF | XCLR |
*Reference index refers to either the Nasdaq 100 Index or the S&P 500 Index.
In many ways, the COVID-19 pandemic has reinforced two long term challenges investors face: the need to generate meaningful income amid a historically low rate environment, and the desire to protect against unforeseeable significant market selloffs.
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With the Federal Reserve keeping policy rates near zero and Central Banks around the world following similar paths, investors are struggling to find asset classes that can generate meaningful yield for their portfolios. Many are stretching into riskier areas of the market, such as taking on greater duration or credit risk. The Global X risk managed income ETFs, QRMI and XRMI, seek to generate monthly income for investors by employing a net credit collar strategy that combines a covered call income-generating strategy with a protective put in an effort to mitigate downside risks. These strategies may offer meaningful income to investors, with little interest rate risk, helping to diversify income-oriented portfolios.
The pandemic-induced market selloff in March 2020 served as a stark reminder of the speed and magnitude with which markets can erase value. While aggressive monetary and fiscal policy helped the markets ultimately recover, many investors remain fearful that future selloffs may not see such quick V-shaped recoveries. Global X’s tail risk and collar strategies seek to help investors manage this risk by utilizing protective puts that offset market losses beyond pre-defined amounts. For example, XTR and QTR offer upside participation in the markets (minus the premium spent to enter the put agreements), while seeking to limit losses to approximately 10% over the three-month period following when it enters into its options positions. XCLR and QCLR seek to limit losses to 5% over a one-month period, while capping gains at 10% (before fees and expenses).
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“By expanding our offering of options-based strategies, we’re able to continue to bring timely solutions that seek to generate additional income or manage market risk,” said Rohan Reddy, research analyst at Global X ETFs. “Through this latest launch, we’re thrilled to add tail risk, risk managed income and collar strategies to our existing lineup of covered call ETFs to help investors navigate the current market landscape.”
All six of the new options funds come with an expense ratio of 0.60%. QRMI and XRMI fall within Global X’s Income family, which looks beyond traditional fixed income to offer solutions for investors seeking to increase or diversify the yield potential of their portfolios. The tail risk and collar 95-110 funds sit within the firm’s Risks Management family, which seeks to help investors navigate market selloffs. In addition to this launch, Global X manages five covered call funds, with nearly $5 billion in total assets under management, which employ options-based strategies in an effort to generate high income.
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