Our call writing strategy aims to collect call premium each and every month.  By collecting this call premium we strive to enhance the return of each ETF on a monthly basis.  In sharp up market movements we are sometimes limited in our participation of the market’s up move.  We strive to never let any option be exercised – so in these up moves we tend to close out our option positions at a loss, while we are making money in the underlying ETF.  In positive months, the net result is an overall increase in the portfolio value due to the increase in the underlying ETF made slightly less by closing out the call option at a small loss relative to the larger gain by the ETF.  On the flip side, when the market is trending sideways or down, our call selling strategy brings in additional income to improve the overall return and helps offset losses of the ETF.

The chart below shows the basis points yielded each month from our call selling strategy on each individual ETF.  One percent is equal to 100 basis points.  By strategically selling calls, we believe that we can enhance the portfolio return, in comparison to simply holding the ETF, while providing less overall risk over the long term.  This strategy is not possible with mutual funds as options are not available.