ALPS - A DST Company announced today the launch of the U.S. Equity High Volatility Put Write Index Fund (NYSE Arca: HVPW). The Fund seeks investment results that correspond generally to the performance, before the Fund’s fees and expenses, of an index called the NYSE Arca U.S. Equity High Volatility Put Write Index. The Index reflects the performance of a portfolio of exchange-traded put options on highly volatile stocks.
The ALPS HVPW Fund is designed for investors who seek to obtain income through selling put options, selling 60-day listed put options every 2 months (6 times per year) on 20 stocks. The Fund intends to distribute, at the end of each 60-day period out of net investment income and/or short-term capital gains, an amount of cash equal to 1.5% of the Fund’s net assets at the end of such 60-day period. If the Fund’s net investment income is insufficient to support a 1.5% distribution in any 60-day period, the distribution will be reduced by the amount of the shortfall. Also note while the Fund only intends to make such distributions out of net investment income and/or short-term capital gains, it is possible that in certain circumstances, a portion of a distribution may result in a return of capital (which is a return of the shareholder’s investment in the Fund).
Investors assume the risk that the underlying referenced equities may close below their strike price, and investors also give up the upside on the underlying equities above the income the fund receives from selling the options. The strike price of each put option included in the Index must be as close as possible to 85% of the closing price of the option’s underlying stock price as of the beginning of each 60-day period.
Note that the potential return of HVPW is limited to the amount of option premium it receives, while the Fund can potentially lose up to the entire strike price of each option it sells. Therefore, though the Fund will collect premium on the options it writes. The Fund’s risk of loss of one or more of its options is exercised and expires in-the-money may substantially outweigh the gains to the Fund from the receipt of such option premiums.