NEW YORK (TheStreet) -- Credit Suisse this week launched an interesting exchange traded note with the Gold Shares Covered-Call ETN (GLDI). The big idea is that the fund will track an index that synthesizes owning the SPDR Gold Trust (GLD) overlaid with a covered-call strategy, then payout the premium by selling the calls in a monthly distribution. Strategically this is not complicated, but where this is an exchange-traded note, there are specific details of how the fund achieves this that must be understood by anyone interested in buying the fund.
The index that the note tracks was created in November and although it has been untradeable, Credit Suisse says that if it had been available, the monthly distributions would have annualized to a 9.45% distribution percentage. It is very important to understand that any actual payments made to note holders could vary. The timing of this launch may turn out to be poor given the recent news of investors possibly getting hurt by equity-linked structured products, a different type of note tied to Apple ( AAPL), that could force note holders to buy AAPL stock near $700, even though it is now trading well below $500. While the structure of GLDI is nothing like the AAPL notes, investors may be wary of products linked to stocks or ETFs offering potentially high yields. The notes linked to AAPL were issued with an 8% yield. This episode has raised questions about whether the AAPL notes were issued to investors as an inexpensive hedge for a position in AAPL stock. Follow @randomroger This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.