IncomeShares ETPs Now on Deutsche Börse Xetra

IncomeShares by Leverage Shares

Author

Jonathan Hobbs, CFA

Date

21 Jan 2025

Category

Market Insights

Two Ways Options ETPs Might Generate Income

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

hgYbLVWWFwZCHy257U0aD4qRVYQUDzLWenhC85dp.webp 19.12 KB

Options-based Exchange-Traded Products (ETPs) have grown in popularity as investors look for alternative ways to generate income beyond traditional stocks and bonds. By using options strategies, these ETPs can potentially offer consistent income while managing risk. In this guide, we’ll explore two common ways that options ETPs might generate income: covered call strategies and cash-secured put writing

1. Covered call strategies 

A covered call strategy involves holding a stock (or asset) and selling call options on it. This lets the ETP collect option premiums, creating a potential income stream. 

Here’s how it works: 

  • Own the asset: The ETP holds shares of a stock (like Nvidia) or an index (like the S&P 500). 
  • Sell call options: The ETP sells call options on those assets with the aim of generating income. 

If the stock price stays below the strike price by expiration, the option expires worthless. This means the ETP doesn’t have to sell any shares to the option buyer – and keeps the option premium as income. 

If the stock price rises above the strike price, though, the ETP must sell the shares at the strike price. This can cap the upside – but the premium income could still boost total returns. 

It’s a trade-off: some growth potential is limited, but consistent premiums can provide steady income. 

Covered call ETP example: IncomeShares Tesla (TSLA) Options ETP 

The IncomeShares Tesla (TSLA) Options ETP aims to generate monthly income by holding Tesla shares and selling out-of-the-money (OTM) call options on the stock. 

By selling OTM calls (where the strike price is above Tesla’s current price), the ETP can collect income. But this strategy could sacrifice growth potential on the stock: if Tesla’s price rises above the strike price, the ETP must sell shares at that price. 

2. Cash-secured put writing strategy 

A cash-secured put strategy involves selling put options while holding enough cash to buy the underlying stock if needed. This allows the ETP to collect premiums and potentially buy stocks at a discount. 

Here’s how it works: 

  • Set aside cash: The ETP holds enough cash to cover the purchase of the stock (or asset) if the option is exercised. 
  • Sell put options: The ETP sells put options on the stock to generate income. 

If the stock price stays above the strike price by expiration, the option expires worthless, and the ETP keeps the premium as income. 

If the stock price falls below the strike price, the ETP must buy the stock at the strike price. Here, the premium collected can reduce the effective purchase price to a potential “discount”. 

Cash-secured put ETP example: IncomeShares S&P 500 Options (0DTE) ETP 

The IncomeShares S&P 500 Options (0DTE) ETP uses a cash-secured put strategy on the S&P 500 ETF Trust. The ETP sells same-day (0DTE) put options with the aim of generating income.  

If the S&P 500 stays above the strike price, the ETP keeps the premium as income. If the index drops below the strike price, the ETP may be obligated to buy the ETF. In that case, the premium collected could help offset the cost. 

Key takeaways 

  • Covered call ETPs can generate income by selling call options but can limit growth potential if the stock price rises. 
  • Cash-secured put ETPs can collect premiums and might buy stocks at an effective discount if prices fall. 
  • Options ETPs tend to sacrifice growth potential for income.

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

Related Products:

Strategy

Covered Call

Distribution Yield

117.88%

Strategy

Covered Call

Distribution Yield

80.17%

Strategy

Cash Covered Put

Distribution Yield

107.06%

Strategy

Covered Call

Distribution Yield

14.10%

This is a marketing communication. Prospective investors should refer to the Exchange Traded Product (“ETP”) Prospectus and Key Investor Information Document (“KIID”) before making any investment decisions.

No Legal or Investment Advice

The information on this website does not constitute legal, financial, or investment advice. It should not be considered an offer to sell or a solicitation to buy any security, including shares of any ETP promoted here, or other financial instruments, products, or services offered by Leverage Shares or its distributors (“Leverage Shares”).

Investment Advices Client Services

Leverage Shares constructs and issues ETPs but does not provide services to private investors, nor does it accept client funds directly. Leverage Shares’ services are exclusively available to professional clients, as defined in this website’s Terms and Conditions. Private investors should consult their personal advisor, broker, or bank for investment or trading inquiries. For technical questions regarding our ETPs, please contact us directly.

Investment Decisions

Any investment in promoted ETPs should be based on the official sales Prospectus, the relevant Supplement, and the KIID, which outline the applicable terms and conditions.

Investment Risks

Investments in ETPs are subject to risk, including potential loss of principal. The value of investments may fluctuate, and investors may not recover the amount originally invested. Past performance is not indicative of future results and should not be the sole factor considered in selecting a product. Investors should carefully consider their investment objectives, risks, charges, and expenses before investing.

Documentations Availability

The Prospectus, KIID, and other relevant documentation are available free of charge on this website, and upon request via email. Please note that except for KIIDs, documents are generally available in English and selected other languages.

Regulatory Information

Retail clients should not rely on information provided here and are encouraged to seek guidance from a qualified IFA.

Not Insured — No Bank Guarantee — May Lose Value

This is a marketing communication. Please refer to the Prospectus of the ETPs and to the KIID before making any final investment decisions.

This information originates from Investium Limited, which has been appointed as distributor of Leverage Shares products in Europe by Leverage Shares Management Company Limited (the “Arranger”). Investium Limited with registered address at 6 Nikou Georgiou Street, Office 302, 1095 Nicosia Cyprus, is a financial services provider regulated by the Cyprus Securities and Exchange Commission (CySEC).

The information is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice. Investium Limited and the Arranger (together referred as “Leverage Shares”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this information. The views and opinions expressed are those of the author(s) but not necessarily those of Leverage Shares. Opinions are current as of the publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results. Information provided by third party sources is believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed.

All performance information is based on historical data and does not predict future returns. Investing is subject to risk, including the possible loss of principal. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Leverage Shares.

© Leverage Shares 2025