The ETF also uses a covered call options strategy to generate more gains. Simpson contends it can increase capital appreciation potential while still minimizing risk exposure.
"The covered call piece is implemented as a means of harvesting volatility to protect a little bit of the downside," he said. "We tactically sprinkle in some short-term, out of the money covered calls." When asked about whether selling covered calls forfeits upside reward potential, Simpson claims there's a balance at play.
"We're thinking about how can we capture 80% to 90% of the rising market and limit the drawdown in the participation in a down-market to 65% or 75%," he said. "Covered calls work best when you need them ... [the] most."
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