WisdomTree Launches Cboe S&P 500 PutWrite UCITS ETF (PUTW)

PUTW offers a complement to equity exposure to improve risk-adjusted returns

London, 7 June 2018: WisdomTree, the exchange traded fund ("ETF") and exchange traded product ("ETP") sponsor, today announced the launch of the WisdomTree Cboe S&P 500 PutWrite UCITS ETF (PUTW), on Borsa Italiana, the product is already listed on the London Stock Exchange and Deutsche Börse Xetra. PUTW offers investors the potential for mitigating volatility and delivering higher risk-adjusted returns compared to the S&P 500®.

The S&P 500 (SPX) is one of the most widely followed indexes for US stock market exposure and when volatility rises, many investors search for ways to reduce their risk while maintaining—or enhancing—their returns.

Rafi Aviav, WisdomTree Head of Product Development in Europe, said, “As investors search for investment opportunities that lie outside traditional asset classes and beyond common risk factors, PUTW offers a unique source of return by delivering an institutional options strategy in a widely accessible UCITS ETF wrapper.”

“PUTW employs an options strategy which includes, on a monthly basis, selling (or “writing”) at-the-money S&P 500 put options and investing the proceeds from that sale in US treasury bills. For assuming the risk of market losses through the put positions, the ETF earns a ‘volatility risk premium’ which can diversify investors’ sources of return and reduce the volatility of equity returns in portfolios,” he said.

WisdomTree has worked with Cboe Global Markets, Inc. (“Cboe”), a global leader in options investing, on PUTW and the ETF aims to track the Cboe S&P 500 PutWrite (“PUT”) index, which has a live track record dating back to 2007.

PUT Index: Historically Provides a Measure of Downside Protection

Christopher Gannatti, WisdomTree Head of Research in Europe said, “With the S&P 500 at or near record highs and investors having enjoyed a strong run of performance, we believe that it could be time to position for greater future volatility and downside risk. This strategy is designed with that in mind, as the option premiums collected cushion downside risk and those premiums also typically rise during bouts of market volatility.”

“Of course, if markets continue to grind higher, there is also an inherent correlation to the S&P 500, and the strategy was able to deliver a double digit return in 2017, a year marked by the absence of volatility in U.S. equities,” he added. 

Historically PUT, the index PUTW tracks, had lower risk, a higher Sharpe ratio (a measure of risk-adjusted returns) and a lower beta compared to the S&P 500. PUT consistently displayed a much smaller drawdown during market downturns; providing 98% of the return of the S&P 500, but only 66% of the volatility from June 30, 1986 through year-end 2017.*

Since June 1986, the PUT Index outperformed 96% of the time when the S&P 500 experienced a daily negative return and 92% of the time during a negative monthly return.**

PUTW: Under the Hood

•  Exposure: Invests in one- and three-month Treasury bills, and sells or “writes” S&P 500 put options
•  Rebalancing: Portfolio is rebalanced on a monthly basis when the Fund rolls the monthly options
•  Options: European-style 1-month S&P 500 options, written “at the money” at the time of monthly roll
•  Fully collateralised: No leverage is employed, and the number of SPX options sold varies month to month and is chosen to ensure full collateralisation, in which the total value of the treasury bill investments must equal the maximum possible loss from final settlement of the puts

S&P 500 Index (SPX): Market capitalization-weighted benchmark of 500 stocks selected by S&P Dow Jones Indices’ US Index Committee, designed to represent the performance of the large-cap segment of the U.S. equity market. 

Cboe S&P 500 PutWrite Index (PUT): index that measures the performance of a hypothetical portfolio that sells S&P 500 Index (SPX) put options against collateralized cash reserves held in a money market account. The PUT 

strategy is designed to sell a sequence of one-month, at-the-money, S&P 500 Index puts and invest cash at one- and three-month Treasury bill rates. The number of puts sold varies from month to month, but is limited so that the amount held in Treasury bills can finance the maximum possible loss from final settlement of the SPX puts. 

Collateral: something pledged as security for repayment in the event of a loss. 

Option Premium: the current price of any specific option contract that has yet to expire. 

Put Options: an option to sell assets at an agreed price on or before a particular date. 

Leverage: total assets divided by equity. Higher numbers indicate greater borrowing to finance asset purchases; leverage can tend to make positive performance more positive and negative performance more negative. 

Gross Premium: see Option Premium. 

“At the money”: option's strike price is identical to the price of the underlying security. 

European-style: an option that can only be exercised on its expiration date. 

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For additional information contact: Sofie Zetterlund, Fogel & Partners
0046 70 570 0997 sofie.zetterlund@fogelpartners.se

Notes to Editors

About WisdomTree Europe Ltd.

WisdomTree Investments, Inc., through its subsidiaries in the US, Europe and Japan (collectively, "WisdomTree"), is an exchange traded fund ("ETF") and exchange traded product ("ETP") sponsor. WisdomTree offers products covering equities, fixed income, currencies, commodities and alternative strategies. Through WisdomTree Europe Ltd, it sponsors WisdomTree UCITS ETFs and Boost short and leverage ETPs. WisdomTree currently has approximately $64.1 billion (as of 11 May 2018) in assets under management globally. For more information, please visit www.wisdomtree.com.

WisdomTree® is the marketing name for WisdomTree Investments, Inc. and its subsidiaries worldwide.

Disclaimer

This document is issued by WisdomTree Europe Ltd (“WTE”), an appointed representative of Mirabella Advisers LLP, which is authorised and regulated by the Financial Conduct Authority (“FCA”) in the United Kingdom. View our Conflicts of Interest Policy and Inventory at www.wisdomtree.eu/cofi. The UCITS products discussed in this document are issued by WisdomTree Issuer PLC (the “Issuer”), an umbrella investment company with variable capital having segregated liability between its funds and organised under the laws of Ireland as a public limited company. The Issuer has been authorised by the Central Bank of Ireland (“CBI”) and is organised as an Undertaking for Collective Investment in Transferable Securities (“UCITS”) under the laws of Ireland and shall issue a separate class of shares ("Shares”) representing each fund. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled “Risk Factors” for further details of risks associated with an investment in the Shares. Any decision to invest should be based on the information contained in the Prospectus and after seeking independent investment, tax and legal advice. The Share may not be available in your market or suitable for you. This document does not constitute investment advice nor an offer for sale nor a solicitation of an offer to buy Shares. This document should not be used as the basis for any investment decision.

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The S&P Index(es) (the “Index(es)”) underlying the product provider’s (the “Issuer”) investment products (the “Investment Products”) are proprietary to S&P Dow Jones Indices LLC (“S&P DJI”).  S&P® and the names identifying the Index(es) are trademarks of Standard & Poor’s Financial Services LLC and have been licensed for use by S&P DJI and sublicensed for certain purposes by the Issuer. The Issuer’s Investment Products based on the Index(es) are not in any way sponsored, endorsed, sold or promoted by S&P DJI, its affiliates or licensors and those parties make no representations or warranties, express or implied, regarding the advisability of investing in securities generally or in the Investment Products particularly or the ability of the Index(es) to track general market performance.

*Sources: WisdomTree, Cboe. 30/06/86-31/12/17. Past performance is not indicative of future results. 

**Sources: WisdomTree, Cboe. 30/06/86-31/12/17. Past performance is not indicative of future results.