Active Covered Call

USA

Cambria lists actively managed ETF with wide remit

Actively managed ETF specialist Cambria Funds is listing a new actively managed fund of funds ETF that uses an options strategy to lower volatility. The Cambria Covered Call Strategy ETF (CCOV) will invest in the full alphabet soup of ETFs, ETPs, ETCs and ETNs. It is happy to use leveraged and inverse products as well.

 

While CCOV’s prospectus does not specify a benchmark or target return, the funds goal is to generate “consistent total return,” while offsetting risk with an options strategy.

 

To offset risk, CCOV will sell covered call options which, to use the US vocabulary, will have strike prices “ranging from at-the-money to 3% out-of-the-money,” the prospectus says. Which options are sold and at what price will be determined by a “proprietary methodology”.

 

The prospectus states that the covered calls will help lower the fund’s volatility as they’ll provide an alternative income source via premiums. However, the prospectus notes that the strategy will require quarterly rebalancing, where options strategies will be reviewed. This will mean higher turnover and potentially lower returns, the prospectus says. 

 

There are no restrictions on what the fund can invest in. In addition to the full remit of ETPs mentioned above, CCOV can invest in currencies, real estate and commodities.

 

While there are several other covered call ETFs available in the US, this is the first that is actively managed.

 

China

China Universal is listing a new ETF called the China Universal SSE Shanghai Reform & Development Theme Launched Fund (510820). I cannot figure out what it does. I’ll update as more information becomes available.