XDTE and QDTE sell zero-days-to-expiry ("0DTE") options each
day to seek income generation. Both funds seek to pay weekly
distributions to fund shareholders.
NEW
YORK, March 7, 2024 /PRNewswire/ -- Roundhill
Investments, an ETF sponsor focused on innovative financial
products, is pleased to announce the launch of the Roundhill
S&P® 500 0DTE Covered Call Strategy ETF (XDTE) and the
Roundhill N-100 0DTE Covered Call Strategy ETF (QDTE), which begin
trading on Cboe BZX today. These groundbreaking ETFs are the
world's first ETFs to leverage the potential benefits of selling
zero-days-to-expiry ("0DTE") options.
XDTE and QDTE each employ a covered call strategy, designed to
provide current income while targeting 100% exposure to the
overnight performance of major indices—the S&P 500® (SPX) and
Nasdaq-100, respectively. Each morning, the ETFs sell
out-of-the-money 0DTE calls on their respective indices. This
approach enables XDTE and QDTE to potentially generate daily
income, while also offering potential upside during the trading
day, up to the limit set by the strike price of the sold calls.
According to CBOE, 0DTE options now account for more than 40% of
SPX total contract volume in 2023.1 Meanwhile, CBOE
estimates that greater than 30% of trading volume in 0DTE option
contracts is attributable to retail traders.2 As a
result, the strategies employed by XDTE and QDTE are intended to
take advantage of potential mispricings inherent to the short-dated
options market where volatility may be structurally overpriced.
"XDTE and QDTE offer investors the potential for high levels of
income on a weekly basis" said Dave
Mazza, Chief Strategy Officer at Roundhill Investments.
"Both ETFs allow investors to potentially benefit from structural
mispricings inherent to the short-dated options market, while
maintaining exposure to major equity indexes."
QDTE and XDTE seek to pay distributions, if any, on a weekly
basis.
1,2 Cboe Global Markets (June
30, 2023). The Rise of SPX® & 0DTE Options.
About Roundhill Investments:
Roundhill Investments is a registered investment adviser focused
on offering innovative financial products designed to offer
exposure to investment themes that appeal to the next generation of
investors. To learn more about the company, please visit
roundhillinvestments.com.
Investors should consider the investment objectives, risks,
charges, and expenses carefully before investing. For a prospectus
or summary prospectus, if available, with this and other
information about the Fund, please call 1-646-661-5441 or visit our
website at https://www.roundhillinvestments.com/etf/. Read the
prospectus or summary prospectus carefully before
investing.
All investing involves risk, including the risk of loss of
principal. There is no guarantee the investment strategy will be
successful. For a detailed list of fund risks see the
prospectus.
Covered Call Strategy Risk. A covered call strategy
involves writing (selling) covered call options in return for the
receipt of premiums. The seller of the option gives up the
opportunity to benefit from price increases in the underlying
instrument above the exercise price of the options, but continues
to bear the risk of underlying instrument price declines. The
premiums received from the options may not be sufficient to offset
any losses sustained from underlying instrument price declines,
over time. Additionally, the Fund is a "synthetic" covered call
strategy, meaning that it derives its long exposure to the S&P
500® Index from options that utilize the S&P 500® Index as the
reference asset. This synthetic exposure increases the likelihood
that the Fund's returns may not always precisely align with the
returns of the S&P 500® Index.
Options Risk. The use of options involves investment
strategies and risks different from those associated with ordinary
portfolio securities transactions and depends on the ability of the
Fund's portfolio managers to forecast market movements correctly.
The prices of options are volatile and are influenced by, among
other things, actual and anticipated changes in the value of the
underlying instrument, or in interest or currency exchange rates,
including the anticipated volatility, which in turn are affected by
fiscal and monetary policies and by national and international
political and economic events. The effective use of options also
depends on the Fund's ability to terminate option positions at
times deemed desirable to do so. There is no assurance that the
Fund will be able to effect closing transactions at any particular
time or at an acceptable price. In addition, there may at times be
an imperfect correlation between the movement in values of options
and their underlying securities and there may at times not be a
liquid secondary market for certain options.
FLEX Options Risk. Trading FLEX Options involves risks
different from, or possibly greater than, the risks associated with
investing directly in securities. The Fund may experience losses
from specific FLEX Option positions and certain FLEX Option
positions may expire worthless. The FLEX Options are listed on an
exchange; however, no one can guarantee that a liquid secondary
trading market will exist for the FLEX Options.
0DTE Options Risk. The Fund's use of zero days to
expiration, known as "0DTE" options, presents additional risks. Due
to the short time until their expiration, 0DTE options are more
sensitive to sudden price movements and market volatility than
options with more time until expiration. Because of this, the
timing of trades utilizing 0DTE options becomes more critical.
Although the Fund intends to enter into 0DTE options trades on
market open, or shortly thereafter, even a slight delay in the
execution of these trades can significantly impact the outcome of
the trade. Such options may also suffer from low liquidity, making
it more difficult for the Fund to enter into its positions each
morning at desired prices. The bid-ask spreads on 0DTE options can
be wider than with traditional options, increasing the Fund's
transaction costs and negatively affecting its returns.
Additionally, the proliferation of 0DTE options is relatively new
and may therefore be subject to rule changes and operational
frictions. To the extent that the OCC enacts new rules relating to
0DTE options that make it impractical or impossible for the Fund to
utilize 0DTE options to effectuate its investment strategy, it may
instead utilize options with the shortest remaining maturity
available or it may utilize swap agreements to provide the desired
exposure.
New Fund Risk. The fund is new and has a limited
operating history.
Derivatives Risk. The use of derivative instruments (i.e.
options contracts) involves risks different from, or possibly
greater than, the risks associated with investing directly in
securities and other traditional investments.
Distribution Tax Risk. The Fund currently expects to make
distributions on a weekly basis. These distributions may exceed the
Fund's income and gains for the Fund's taxable year. Distributions
in excess of the Fund's current and accumulated earnings and
profits will be treated as a return of capital.
Roundhill Financial Inc. serves as the investment advisor. The
Funds are distributed by Foreside Fund Services, LLC which is not
affiliated with Roundhill Financial Inc., U.S. Bank, or any of
their affiliates.
Glossary
Options
An option is a contract sold by one party to another that gives
the buyer the right, but not the obligation, to buy (call) or sell
(put) a stock at an agreed upon price within a certain period or on
a specific date.
Strike Price
The strike price is the price at which the holder of the option
can exercise the option to buy or sell an underlying security,
depending on whether they hold a call option or put option.
Covered Call Strategy
A covered call strategy involves writing (selling) covered call
options in return for the receipt of premiums. The seller of the
option gives up the opportunity to benefit from price increases in
the underlying instrument above the exercise price of the options,
but continues to bear the risk of underlying instrument price
declines.
Out-of-the-Money Options
Out-of-the-money options are options whose strike price is above
the market price of the underlying asset.
0DTE Options
0DTE (zero days to expiration) are options that are set to
expire at the end of the trading day on which they are written.
Nasdaq-100 Index (N-100)
The NASDAQ-100 Index® is a modified capitalization-weighted
index of the 100 largest and most active non-financial domestic and
international issues listed on the NASDAQ. No security can have
more than a 24% weighting.
S&P 500 Index (S&P 500®)
The S&P 500® is widely regarded as the best single gauge of
large-cap U.S. equities. The index includes 500 leading companies
and covers approximately 80% of available market
capitalization.
SOURCE Roundhill Investments