Portfolio construction

ETF trends: Options-oriented strategies’ growing appeal

January 16, 2025 - 2 min read

Senior Vice President, Head of Institutional Product and ETFs – Natixis Investment Managers – US Distribution

Well, what's interesting is that there is an interest now in options oriented ETFs. Nicholas, can you tell us a little bit why that is so?

Yeah, for sure. And that's been a trend that has been building in the last maybe four or five years, but it's been really punctuated the last year or two. And when I look at that options oriented ETF space, it's now about $140 billion. If you're looking at the derivatives income category, as well as the buffer type category. So it's clearly very sizable, something that we're all noticing. Previously before the last, as I said, five to six years in earnest, these options oriented products were really being used by institutional investors instead of retail investors or advisors. So now that all is changing. And now we're able to get these options oriented products in the hands of again, advisors and investors. And as I mentioned, there are two main areas that interest me and seemingly because of the flows has also interested financial advisors. And that's the derivatives income and the buffer products. On the buffer side, I think investors just like the predictability. They understand that they have a return channel to live in, so to speak, with a given product, with a predictable downside, of course, giving up some of the upside. So the buffer oriented products have been helpful for that reason. Again, really fitting in with the goal that the investor has. And then on the derivatives income side, probably more of a newer options oriented product than buffer, but one that has gathered a lot of attention. This is perfect for those that are in perfect in quotes. Certainly everyone has to do one's own research on anything. But this is really interesting for those that want to complement fixed income, income with a different source of income. So what these products are doing in derivatives income is selling away some of the upside in the portfolio and return capturing options income through call selling in that way.

One ETF trend observed in 2024 was a growing interest in options-oriented ETFs. Nicholas Elward, Senior Vice President and Head of Institutional Product and ETFs at Natixis Investment Managers, shares his insight on trends in ETFs he is tracking.

Key takeaways

The options-oriented ETF space has grown to about $140 billion, including the derivatives income and buffer categories.
Once only used by institutional investors, options-oriented strategies are now available to financial advisors and individual investors.
Delivering a diversifying source of income to portfolios beyond fixed income strategies, derivatives income strategies are a newer options-based offering now available to all types of investors.

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The views and opinions expressed are as of December 6, 2024, and may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.

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