4 Reasons Why Peerless ETFs (NYSE: WEEL) Provides Protection & Growth In Market-Neutral Conditions, Which Is An Often Overlooked Diversification Keystone
Peerless etfs
(NYSE: WEEL)
An Innovative Investment Strategy
The Peerless Option Income Wheel ETF (NYSE: WEEL) stands out in the investment landscape as the first-ever ETF providing turnkey access to the popular Option Wheel investment strategy. This innovative approach utilizes a dynamic, patent-pending combination of secured put writing and covered call writing to generate income.
Unlike traditional equity investments, WEEL aims to deliver equity-like returns with reduced overall volatility, making it an appealing choice for investors seeking a balance between income generation and risk management. The disciplined, mechanical methodology underpinning WEEL assists in buying low and selling high while continuously collecting income, providing a sustainable and risk-managed solution to create excess returns in range-bound markets.
Moreover, the strategy’s independence from market index appreciation sets it apart, offering potential returns regardless of bullish or bearish sentiments. The fund’s allocation predominantly across sector ETFs, with flexibility to utilize individual securities if necessary, ensures broad market exposure while effectively managing risk.
This structured approach, free from emotional biases and market predictions, aims to simulate broad market exposure on a notional basis, leveraging cash (or treasury) secured puts. By maintaining tight time frames for short put positions, the strategy allows for frequent buffer resets, controlling downside risk and ensuring continuous income generation.
Income Generation and Volatility Reduction
One of the core objectives of the Peerless Option Income Wheel ETF is to generate current income while dampening volatility compared to traditional long-only portfolios. This is achieved through a strategic blend of put premiums, call premiums, and cash yield, creating a triple income potential. The fund’s methodology involves writing out-of-the-money secured puts to provide a buffer against potential losses while generating income.
If these puts are assigned, the positions are then managed with covered calls until they rebound, ensuring continuous income generation. In bearish market conditions, the majority of positions may be assigned, resulting in a diversified equity allocation across sectors and market capitalization.
The strategic approach of WEEL aims to outperform typical covered call strategies, especially in flat or down markets. Historical data indicates that the S&P 500 Index experienced calendar-year losses exceeding 8% nearly one-fifth of the time from 1925 to 2020. During such periods, WEEL’s approach of collecting put and call premiums, along with interest on cash sweeps or treasuries, provides a significant advantage.
This focus on income generation, combined with risk management features akin to buffer-style products, allows WEEL to achieve equity-like returns with lower overall volatility, offering investors a sophisticated and resilient income strategy.
peerless etfs
(nyse: weel)
How They Work: The Peerless Option Income Wheel
- Utilizes only Secured Puts / Covered Call writing strategies as a means of reducing portfolio risk.
- Derivative Income Category – Not a “structured outcome” product (Options Trading Category)
- Portfolio Construction includes sector ETFs, individual names, and other products for necessary exposure.
- Rules-based process that is repeatable and proprietary. Assists in buying low, selling high.
- Risk Profile is lower than the typical covered call strategy (via beta).
- Core long-term alternative. Not a fad product.
- Peerless has been running this strategy in both Separately Managed Account format and hedge fund format on a formalized basis since March 2021.
- Extensive back testing has confirmed confidence in the strategy.
Introducing the Management Team of Peerless ETFs (NYSE: WEEL)
Peerless Wealth, LLC is an SEC-registered investment advisory firm and investment manager specializing in wealth and investment management for affluent clients. Founder Erik Thompson posits that a considerable number of individual investors, alongside numerous financial advisors, may not allocate sufficient focus towards planning for (and capitalizing on) markets characterized by stagnation, or bounded within a specific range. Over the last few years, he began running the option wheel income generation technique on an account-by-account basis and also in a private hedge fund. Performance solidified the technique and gave Peerless Wealth the confidence to roll it out to the public via an ETF. Peerless ETFs, a division of Peerless Wealth, LLC, offers the first and only SEC-registered 40-Act fund that utilizes the Option Wheel.
Erik Thompson
Peerless Wealth Founder - Co-Portfolio Manager
Robert Pascarella, PE
Research & Trading, Co-Portfolio Manager
Rob serves as an IAR at Peerless Wealth. An engineer by trade, he collaborated closely with Erik in the conceptualization and enhancement of their proprietary strategy. Notably, their innovative approach has garnered patent pending status with the US Patent and Trademark Office (USPTO). Leveraging further mathematical and data science background, Rob’s work extended to comprehensive backtesting, where the duo rigorously assessed the efficacy and robustness of their trading strategy across various market conditions. Through meticulous analysis of historical data and simulations, they refined the strategy to ensure its resilience and effectiveness in navigating dynamic market environments. This iterative process underscores their commitment to delivering a sophisticated and adaptive investment solution.
Sources
- Source 1: https://peerlessetfs.com/
- Source 2: https://peerlessetfs.com/wp-content/uploads/2024/05/WEEL_May24_PostEffectiveWeb-1.pdf
- Source 3: https://finance.yahoo.com/quote/WEEL/news/
- Source 4: https://money.usnews.com/funds/etfs/derivative-income/peerless-option-income-wheel-etf/weel
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