Rating Exposure

While some investors are concerned that exchange-traded funds with options overlays could limit returns, experts suggest that hedging strategies like options — serving as a bet against a fund’s equity position — also protect against significant losses,which ia a key benefit at play./p>

They might be capped on the upside, but they’re certainly capping their downside protection as well.This is really getting people off the sidelines, back into the broad-based equity market.

The risk management strategy is increasingly gaining popularity with investors.Over 75% of all ETF launches in 2023 were active. Most notably within the active ETF space are portfolios that have options-embedded strategies within the portfolios.About those 75% of ETFs that were launched last year, 70% were either active equity or equity derivative strategies.

Data show that more investors are moving money out of popular fixed-income products and into risk assets as a result. They want to re-risk their portfolio,and they’re watching the equity market go up. They want to get out of a 5% CD or 5% money market account, and they’re doing it through these options-based strategies, through the Nasdaq and through various other exchanges.