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:
HGY – Gold Yield
HZY – Silver Yield
HOY – Crude Oil Yield
HNY – Natural Gas Yield
Yield from commodities through options! Gotta love it,