BlackRock Broadens Outcomes Suite with Equity BuyWrite ETFs
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Insights
BlackRock's introduction of the iShares S&P 500 BuyWrite ETF (IVVW) and the iShares Russell 2000 BuyWrite ETF (IWMW) represents a strategic expansion in their product offerings, directly targeting income-seeking investors. The use of a covered call strategy, where call options are sold on the underlying indices, is a conservative approach to generating income. This strategy typically appeals to investors who are seeking yield in a low-interest-rate environment or those who anticipate moderate growth in the underlying stocks.
The expense ratios for IVVW and IWMW, at 0.25% and 0.39% respectively, are competitive within the ETF space and investors would do well to compare these costs with potential returns. The monthly distribution of call option premiums, in addition to quarterly dividends, may offer a steady income stream, which is particularly attractive during volatile market periods or when traditional fixed-income yields are low.
However, it's important to note that while covered call strategies can provide income, they limit upside potential since the option buyer may exercise the call, requiring the fund to sell the underlying asset at the strike price. Investors should balance the desire for immediate income against the possibility of foregoing significant gains if the market rallies.
BlackRock's launch of these ETFs is indicative of the evolving demand for income diversification and the growing interest in options-based strategies. The ETFs' design to offer a monthly income stream through call options is a response to the investor's appetite for alternative income sources beyond traditional bonds and dividend stocks. The choice between the S&P 500 and Russell 2000 indices allows investors to tailor their exposure to their market capitalization preferences, with IVVW focusing on large-cap equities and IWMW on small-cap equities.
Market trends show a heightened interest in outcome-oriented strategies, as investors look to manage risk while seeking returns. BlackRock's derivative investing expertise and their extensive lineup of financial products position them to capitalize on this trend. The success of these ETFs will depend on their ability to deliver the promised income and manage the risks associated with selling options. Investors will likely monitor the performance of these ETFs closely to determine if they meet their income and risk management goals.
Target enhanced monthly income with an exchange traded fund utilizing a covered call strategy on either
The ETFs provide access to a differentiated source of income by selling monthly call options on their underlying indices – in addition to receiving dividend income – in a single-ticker solution. The Funds expand BlackRock’s outcome-oriented strategies, joining a lineup which includes fixed income BuyWrite and buffer ETF strategies, among others.
“Income remains top of mind as investors move out of cash and prepare for a shift in monetary policy,” said Rachel Aguirre, Head of
ETF |
Index |
Expenses |
iShares S&P 500 BuyWrite ETF (IVVW) |
S&P 500 Index |
|
iShares Russell 2000 BuyWrite ETF (IWMW) |
Russell 2000 Index |
|
Enhance Equity Income Beyond Traditional Sources
Shareholders can anticipate monthly distribution of the call option premiums collected and dividends distributions on a quarterly basis, while providing incremental limited equity upside exposure. Supported by BlackRock’s extensive derivative investing expertise, these ETFs implement a popular options strategy with the liquidity and convenience of an ETF wrapper.
As client demand for outcome-oriented strategies continues to grow, BlackRock is positioned to enable access to both broad and specialized exposures throughout the market. BlackRock equips clients with an extensive and complementary array of portfolio tools spanning active and index strategies in their wrapper of choice.
About BlackRock
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About iShares
iShares unlocks opportunity across markets to meet the evolving needs of investors. With more than twenty years of experience, a global line-up of 1400+ exchange traded funds (ETFs) and
Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses which may be obtained by visiting www.iShares.com or www.blackrock.com. Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal.
A BuyWrite Strategy ETF’s use of options may reduce returns or increase volatility. During periods of very low or negative interest rates, the Underlying Fund may be unable to maintain positive returns. Very low or negative interest rates may magnify interest rate risk. In a falling interest rate environment, the ETF may underperform the Underlying Fund. By writing covered call options in return for the receipt of premiums, the ETF will give up the opportunity to benefit from increases in the value of the Underlying Fund but will continue to bear the risk of declines in the value of the Underlying Fund. The premiums received from the options may not be sufficient to offset any losses sustained from the volatility of the Underlying Fund over time. The ETF will be subject to capital gain taxes, ordinary income tax and other tax considerations due to its writing covered call options strategy.
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by Cboe Global Markets, Inc, Russell Investment Group, or S&P Dow Jones Indices LLC. None of these companies make any representation regarding the advisability of investing in the Funds. BlackRock Investments, LLC is not affiliated with the companies listed above.
The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
© 2024 BlackRock, Inc. or its affiliates. All Rights Reserved. BLACKROCK and iSHARES are trademarks of BlackRock, Inc. or its affiliates. All other trademarks are those of their respective owners.
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Media contacts
Jenna Merchant
Jenna.merchant@blackrock.com
+1 (914) 329-5684
Joanna Yau
Joanna.yau@blackrock.com
+1 (646) 856-7274
Source: BlackRock
FAQ
What are the ticker symbols for the new ETFs introduced by BlackRock?
What is the expense ratio for iShares S&P 500 BuyWrite ETF (IVVW) and iShares Russell 2000 BuyWrite ETF (IWMW)?
How do the ETFs generate income for shareholders?
What is the main focus of the new ETFs introduced by BlackRock?
Who is the Head of U.S. iShares Product at BlackRock mentioned in the PR?
