BlackRock today introduced what it calls the industry's first buy-write bond ETFs, a product suite aimed at boosting yield potential during a difficult fixed income environment.
The three iShares BuyWrite ETFs — iShares 20+ Year Treasury Bond BuyWrite Strategy ETF (Cboe: TLTW), iShares High Yield Corporate Bond BuyWrite Strategy ETF (Cboe: HYGW) and the iShares Investment Grade Corporate Bond BuyWrite Strategy ETF (Cboe: LQDW) — provide access to buy-write strategies on baskets of fixed income securities, BlackRock said.
Net expense ratios for the funds are 0.35% for TLTW, 0.69% for HYGW and 0.34% for LQDW.
In general, investors using a buy-write strategy purchase an underlying security while also writing a call option on it, generating income from selling the option.
Each new BlackRock ETF packages two potential income sources into one ticker — premiums generated by selling monthly call options on the underlying ETFs (TLT, HYG and LQD) and the yields from each of the underlying ETFs themselves, according to the firm.
"The iShares' bond ETF platform has the world's largest, comprehensive toolkit for individuals and institutions by providing access to the $124 trillion fixed income market with essential building blocks for a wide variety of macroeconomic climates," said Carolyn Weinberg, global head of product for ETF and index investments at BlackRock.
