Are Equity Put-Write ETFs Working?

Is systematically selling covered equity put options, as implemented by exchange-traded funds (ETF), attractive? To investigate, we consider four equity put-write ETFs, two dead and two living:

1. US Equity High Volatility Put Write (HVPW) – oriented toward individual stocks (dead).
2. ALPS Enhanced Put Write Strategy (PUTX) – index-oriented (dead).
3. WisdomTree PutWrite Strategy Fund (PUTW) – index-oriented (living).
4. BMO US Put Write (ZPW.TO) – oriented toward individual stocks (living).

Because available samples are fairly short, we focus on daily return correlation with SPY, average daily return, standard deviation of daily returns and daily reward/risk (average daily return divided by standard deviation of daily returns). We also look at compound annual growth rates (CAGR) and maximum drawdowns (MaxDD) based on daily data. We consider SPDR S&P 500 ETF Trust (SPY) and CBOE S&P 500 PutWrite Index (PUT) as benchmarks. Using daily returns for the four ETFs as available through early August 2023, and contemporaneous daily returns for SPY and PUT, we find that: (more…)