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By Heather Bell

Last Thursday, Invesco PowerShares launched another two exchange-traded funds on the NASDAQ Stock Exchange.

One was the long-awaited PowerShares NASDAQ-100 BuyWrite Portfolio (NASDAQ: PQBW) which tracks the CBOE NASDAQ-100 BuyWrite Index. A "BuyWrite" strategy tracks a theoretical portfolio that sells call options on a particular index, against a portfolio of that same index's component stocks—in this case, the index in question is the NASDAQ-100.

BuyWrite strategy indexes generally underperform the standard index they are linked to when that standard index is rising, but offer significant downside protection if the underlying index falls. And they tend to have solid long-term performance in most markets.

Until last week, there were only two exchange-traded BuyWrite products available to U.S. investors—the PowerShares S&P 500 BuyWrite Portfolio (NYSE: PBP), launched late last year, and the iPath CBOE S&P 500 Index ETN (AMEX: BWV), launched in May 2007. However, those two products have not accumulated much in the way of assets: just $11 million in PBP and $22 million in BWV. BuyWrites tend to be more popular in the closed-end fund market, where they are sold with commissions.

Still, many believe these funds could prove popular with ETF investors in the long run.

PQBW is the first BuyWrite product to be tied to the NASDAQ-100 Index. It charges an expense ratio of 0.75%.

The other fund to launch was the PowerShares NASDAQ Internet Portfolio (NASDAQ: PNQI), which tracks the NASDAQ Internet Index. The index encompasses firms involved in a wide variety of Internet-related business activities, from access providers to search engines to online commerce.

The Ghost Of The Internet Bubble? 

Interestingly, there aren't a lot of ETFs tracking Internet stocks—it's almost like the Internet bubble of yore is still fresh in the minds of investors and ETF providers. Many investors often mistake the QQQQ for an Internet fund, but that's not the case. QQQQ's underlying index is simply the 100 largest non-financial stocks trading on the NASDAQ Stock Market; it's just that during the Internet bubble, many of those 100 stocks were Internet or at least technology companies.

The First Trust Dow Jones Internet Index Fund (AMEX: FDN) appears to be the only other standard ETF to cover that specific industry; it charges a net expense ratio of 0.60%, the same as PNQI, and has about $23 million in assets.

There are also four HOLDRS from Merrill Lynch currently trading that track various aspects of the Internet industry, including the Internet HOLDRS (AMEX: HHH), B2B Internet HOLDRS (AMEX: BHH), Internet Architecture HOLDRS (AMEX: IAH) and Internet Infrastructure HOLDRS (AMEX: IIH). However, these are not index-based investments—HOLDRS simply "hold" a group of stocks indefinitely. There is no rebalancing or updating of the portfolio, and the number of stocks tends to decrease as companies are acquired by others—BHH, for example, currently has just two holdings. BBH has about $5 million in assets, but the broad Internet portfolio, HHH, has more than $375 million in assets and a portfolio of 12 stocks, indicating that investor interest in the sector remains.

Perhaps what's most intriguing about the latest PowerShares launch is not the unique products, but the fact that the NASDAQ Stock Market seems to be developing a relationship with Invesco PowerShares (NYSE:IVZ), the third-largest ETF provider in the U.S. Roughly 20 PowerShares ETFs have primary listings on the NASDAQ, accounting for the majority of the exchange's primary ETF listings, and several of those funds track NASDAQ indexes (not to mention a few PowerShares ETFs that are still in registration). With the NYSE and American Stock Exchange set to merge, the NASDAQ, which has the least number of ETF listings of the three exchanges, might feel it has to build up its ETF business—and the relationships associated with it—a bit more.

Read the prospectus for PQBW here.

Read the prospectus for PNQI here.

Source: PowerShares Launches Nasdaq BuyWrite, Internet Portfolio ETFs