Buy-Write Funds Lag Market’s Rally

Buy-Write funds underperformed the broader market rally in 2009.

According to the WSJ article Buy-Write Managers Feel a Chill, the PowerShares S&P 500 BuyWrite ETF (PBP) fell 30% in 2008 compared to the 37% decline for the S&P 500 Index. However, the fund trailed the benchmark index by two percentage points in 2009′s market recovery.

Buy-Write funds reduce risk by writing call options against stock positions. In down markets, losses are mitigated. However, in up markets, upside appreciation is capped.

Be Sociable, Share!

Powered by WordPress. Designed by Woo Themes