PUTW Offers Strategy for Potential Volatility Mitigation & Potential for Higher Risk-Adjusted Returns Compared to S&P 500 Index

PUTW Tracks Index with Live Track Record Since 2007

NEW YORK, Feb. 24, 2016 (GLOBE NEWSWIRE) — WisdomTree (NASDAQ:WETF), an exchange-traded fund (“ETF”) and exchange-traded product (“ETP”) sponsor and asset manager, today announced the launch of the CBOE S&P 500 PutWrite Strategy Fund (PUTW), on the NYSE Arca. PUTW seeks to provide investment results that, before fees and expenses, generally correspond to the performance of the CBOE S&P 500 PutWrite Index (PUT) and has a net expense ratio of 0.38%.1

Index-based Strategy for Potential Volatility Mitigation and Risk Reduction 

The S&P 500 Index (SPX) is one of the most widely followed indexes for U.S. stock market exposure. But when volatility rises, many investors search for ways to reduce volatility while maintaining—or enhancing—their returns.

Luciano Siracusano, WisdomTree Chief Investment Strategist, said, “Put writing has been used by investors for decades as a solution to potentially increase the yield and lower the volatility of equity returns over various market cycles. We’ve teamed up with the Chicago Board Options Exchange (CBOE), a leader in options investing, to provide access to an index developed with a live track record dating to 2007 that has shown lower volatility over time, relative to the S&P 500.”

Historically PUT, the index PUTW tracks, had lower standard deviation than the S&P 500 Index; PUT provided 97% of the return of the S&P 500, but only 77% of the volatility from June 30, 2007 through year end 2015.2 Past performance is not indicative of future results.

PUT Index: Historically Provides a Measure of Downside Protection 
Siracusano said, “Returns for PUTW will largely be driven by the premiums received from selling put options and also income earned on the collateral. The fund, itself, does not own stocks. Given the recent volatility in the market, we believe PUTW can be used to potentially dampen equity volatility and serve as an alternative way to generate total return in the current low-yield environment.”

Since 2007, PUT, the index PUTW tracks, outperformed 95% of the time when the S&P 500 Index experienced a daily negative return and 90% of the time during a negative monthly return.3

PUTW: Under the Hood

  • Exposure: Invests in one- and three-month Treasury bills, and sells or “writes” S&P 500 Index put options.

    • Rationale/Potential Benefits: The number of put options sold is chosen to ensure full collateralization. This is also referred to as a “cash secured put” and the amount of cash invested in Treasury bills is set to cover total losses that can be incurred from writing the puts. There is thus no leverage in the writing of these cash secured puts.
  • Rebalancing: Portfolio is rebalanced on a monthly basis when the Fund rolls the monthly options

    • Rationale/Potential Benefits: Fund rolls options on a monthly bases – instead of quarterly or longer – to seek to capture more gross premium
  • Options: Written “at the money” at the time of monthly roll, referred to as European-style

    • Rationale/Potential Benefits: Options are written “at the money” at the time of monthly roll in order to try to capture more gross premium; and the European-style seeks to reduce trading costs and an additional element of risk
  • Distributions: income and capital gains are scheduled to be distributed to shareholders on an annual basis.

    • Rationale/Potential Benefits: Net profits derived from premiums received on option writing are not considered income; they are considered capital gains and will be combined with the gain or loss when the options are sold. If there are net gains, than they will be distributed once annually in December. In addition, net capital gain or loss from written option contracts on a broad-based index (such as the S&P 500 Index) will be characterized as 60% long-term and 40% short-term capital gain or loss under U.S. tax rules.
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