ETF Update: New BuyWrite Offerings, November Performance, Bond Boom, More Arca Moves

Includes: BWV, GEX, PBP, PGB, RSX
by: Tom Lydon

New PowerShares BuyWrite Offerings

PowerShares is set to launch the first family of BuyWrite ETFs this month. They will provide access to but-write option strategies on three of the most widely used benchmarks -the S&P 500, Dow Jones Industrial Average, and NASDAQ-100 Indexes.

The company states that buy-write strategies are often used to reduce volatility, during certain market conditions, and can provide additional income to a portfolio through call option premiums. In a buy-wright investment strategy an investor buys stocks and then writes covered call options on them. Barclays introduced a buy-write ETN in May. iPath CBOE S&P 500 BuyWrite Index ETN (NYSEARCA:BWV) is up 0.4% since inception.

The new ETFs anticipated on December 20th include:

  • PowerShares S&P 500 BuyWrite Portfolio (NYSEARCA:PBP)
  • PowerShares DJIA BuyWrite Portfolio (PGB)
  • PowerShares NASDAQ-100 BuyWrite Portfolio (PQBW)

November Performance Report

November has been a volatile month, to say the least, for the markets and ETFs. Major market indexes and ETFs ended the month down. Thus it isn't too surprising that the UltraShort ETFs had monthly returns ranging from 5% to 19%.

The Dow Jones industrial average lost 4% in November, while the S&P 500 was down 4.4% and the Nasdaq was lower by 7%. Global ETFs were down as well, with Europe down about 3% and Latin America lost about 6%. Asian ETFs fell between 2% for Japan and 14% for China. The India ETN gained 5.7%.

Agricultural ETFs gained almost 6% for November, followed by fixed income ETFs gaining about 3%. Real estate related ETFs were the worst performers for the month. Click here to view the November ETF performance report.

Bond ETF Boom

Remember last year when there were only six fixed income ETF options? ETF providers have certainly been working to increase the offering in this area, as there are now 30 bond-focused funds to choose from and 40 more in the pipeline, according to Murray Coleman of Dow Jones Newswires.

Fixed-income products represent about 5% of the ETF market, leaving room for growth; especially as baby boomers age and look to a larger bond allocation in their portfolios. The Investment Company Institute reports net inflow for the first nine months into bond ETFs was $8.4 billion. In the past 12 months inflows have risen 127%.

Fixed-income ETFs range from short-term treasury to high yield to municipal to international bonds. The best selling bond ETF this year is the iShares Lehman 1-3 Year Treasury Bond Fund (SHY), which is up 3.2% year-to-date.

Van Eck Arca Move

Van Eck Global is beginning the transfer of NYSE-listed ETFs to the NYSE Arca electronic trading platform. As of opening on trading day Friday, December 17, 2007, these two ETFs will officially be transferred:

  • Market Vectors-Russia ETF (NYSEARCA:RSX)
  • Market Vectors-Global Alternative Energy ETF (NYSEARCA:GEX)

This all electronic trading platform is the single largest public liquidity pool for ETFs, so says the NYSE. During the first half of 2007, Arca handled 43% of all U.S. ETFs traded, representing an average daily trading volume of 231.96 million shares per day.