HEDG Is a Hedged Equity ETF
The recently launched Equitable Shares Hedged Equity ETF has the ticker HEDG. It employs a novel investment strategy that aims for upside growth while aiming to neutralize market risk. So what does a fund own and how does it work?
As the symbol says in the ticker HDG, it's a hedge product. It's very straightforward. We're a beta play on the market. We're long two securities, SPY IV, two ETFs that track the S&P 500.
We hedge them in a combination of covered calls and a long put spread. We sell 90-day call options against the underlying positions. We roll those positions systematically. We then buy an out-of-the-money put spread on about a third of the portfolio.
The net result, Stephanie, is that you end up with exposure to the S&P 500 with about 40% of the volatility, producing income of about the after tax yield, the 10 year. We've recorded distributions and we do put an emphasis on tax efficiency on our distributions.
