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Covered Call Commodity ETFs

March 6, 2012|By David Lester

Horizons has just launched four commodity exchange traded funds (ETFs) with a covered call strategy and “I’m as happy as a little girl” to quote the great Mike Myers.

The four new ETFs will be made up of the actual commodity instead of stocks in that industry. For example, before we could buy Canadian energy stocks with a covered call strategy with HEE (Horizons Enhanced Income Energy).  Investors would email me and ask why their oil stocks wouldn’t keep up with the actual price of crude oil.  There are many reasons for this such as bad management, market sell offs, or regional problems.  But now with these pure plays on OIL, SILVER, GOLD and NATURAL GAS, you are investing in the actual commodity and NOT stocks that are in that sector. If the commodity goes up or down you’ll see it reflected in this product.

PLUS, being a lover of options, these commodity ETFs will be selling covered call options on 33% of the futures portfolio.  And yes, you can actually sell options on commodity futures as well as stocks.  Due to the fact that commodity prices can be volatile, the premiums generated from futures options are much larger than if you were selling the same dollar amount on say an energy stock.

The distributions from these ETFs haven’t been announced yet but having traded options on futures in my past, I know that they will be quite juicy, even only 33% of the portfolio. This is the only way to get yield from a pure commodity play because commodities don’t pay dividends.

Here are the symbols for the four commodity ETFs just launched.  You can find out more at  here:

http://horizonsetfs.com

HGY – Gold Yield

HZY – Silver Yield

HOY – Crude Oil Yield

HNY – Natural Gas Yield

 

Yield from commodities through options!  Gotta love it,

Dave

 

 

David Lester
About David Lester

David Lester is a best selling author and professional Financial Coach, helping people be better with their money. David has written a personal finance book that breaks with traditional attitudes towards finance and describes his own philosophy to money that he has gained through his personal and professional experiences. His philosophy on money applies to many areas of everyday life, including banking, investing, goal setting, shopping and entertainment.