Next Evolution Options Strategies: Seeking Income as the Outcome

By: NEOS Investments

NEOS Investments was founded by a global team of experts who collectively bring decades of experience, both individually and as colleagues working together at several previous firms on numerous ETFs currently in market.

Our suite of options-based income ETFs combine quantitative analysis with decades of experience trading and investing across multiple markets, aiming to empower the investor with core portfolio building blocks that seek to provide monthly income, tax efficiency, and diversification through data-driven options-based ETFs.

To this point, though there has been a proliferation of options-based ETF strategies brought to market, the vast majority provide only a one-dimensional solution such as income generation or downside protection, and we believe investors want and deserve more.

Potential Benefits of our Next Evolution Options Strategies:

Seeks high monthly income
Aims to capitalize on tax efficient product structures and fund management
May function as an income enhancing complement to core portfolio allocations
Seeks to meet investor demands across both fixed income and equity allocations
Utilizes data-driven research that seeks to enhance investor outcomes

Aiming to Overcome Current Challenges to Income Generation

As the frequency of once-in-a-generation events seemingly increases, traditional income-oriented investments may no longer provide the income potential investors need. The capital you invest requires strategies that consider the challenges of our current market while aiming to evolve with our marketplace.

Our Next Evolution of Options Strategies are designed to help navigate the challenges of modern markets, providing income generation and tax-efficiency layered on top of the core portfolio exposures across equities, fixed income, and cash.

ETFs That Seek Income as the Outcome

When seeking income is the desired outcome, more investors have been turning to options trading to supplement their portfolio yield. The liquidity and growing accessibility of options markets provide more opportunities to supplement return and protect purchasing power, while the scope and complexity of options investments benefit from an experienced manager.

NEOS ETFs seek to offer higher income with greater tax efficiency:

Multi-dimensional products: NEOS options-based solutions are designed to generate monthly income AND provide compelling total returns in tax efficient offerings.

Active Management: A data-driven approach utilizing systematic, rules-based active management aims to enhance investor outcomes throughout different market cycles.

Core Portfolio Building Blocks: NEOS ETFs offer core portfolio exposure with data-driven options strategies seeking monthly income, packaged into accessible ETFs. The result is high monthly income potential for equities and enhanced monthly income potential for fixed income and cash alternatives.

Income Generating Overlays: Income is added through premium generated from writing (selling) covered calls on equity products or put spreads on fixed income and cash alternative products. This alternative approach to traditional income focused investments may help offset interest rate risk, inflationary pressures, and offer greater portfolio diversification.

Enhanced Income 1-3 Month T-Bill ETF (CSHI) & Enhanced Income Aggregate Bond ETF (BNDI):

Core fixed income and cash alternative ETFs that seek to provide enhanced monthly income (above investing in the same underlying exposure)
Enhanced income potential is generated from the sale of S&P 500 index put options subject to favorable 60/40 tax rates
Seeks to maintain a similar risk profile to the underlying index investment
Fund managers aim to take advantage of tax loss harvesting opportunities within the portfolio
May limit credit, duration, and inflation risks present in many fixed income investments

S&P 500 High Income ETF (SPYI):

Core equity ETF that seeks to provide a high monthly income stream
Majority of income potential is generated from the sale of SPX Index call options subject to favorable 60/40 tax rates
Fund managers aim to take advantage of tax loss harvesting opportunities within the portfolio
Opportunity for partial upside capture when the S&P 500 Index appreciates
May be less sensitive to credit, duration, and inflation risks present in many traditional income-oriented investments

Related Topics:

The Difference Between 30-Day SEC Yield, Distribution Yield, and Dividend Yield

Understanding the differences between 30-day SEC yield, distribution yield, and dividend yield can help investors better evaluate the performance of their income-focused investments. 30-day SEC yield doesn't include income received from selling options, which is why distribution yield provides a more comprehensive representation of the income generated by NEOS ETFs.

Understanding "Return of Capital"

Aiming to Maximize Returns and Minimize Taxes: The Potential Benefits of Return of Capital Distributions in Option-Writing ETFs

Investors should carefully consider the investment objectives, risks, charges and expenses of Exchange Traded Funds (ETFs) before investing. To obtain an ETF's prospectus containing this and other important information, please call (866) 498-5677 or view/download a prospectus here: SPYI | QQQI | BNDI | CSHI. Please read the prospectus carefully before you invest.

An investment in NEOS ETFs involve risk, including possible loss of principal. The equity securities purchased by the Funds may involve large price swings and potential for loss.

The use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. These risks include (i) the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations; (ii) risk of mispricing or improper valuation; and (iii) the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Derivative prices are highly volatile and may fluctuate substantially during a short period of time. The use of leverage by the Fund, such as borrowing money to purchase securities or the use of options, will cause the Fund to incur additional expenses and magnify the Fund’s gains or losses. The earnings and prospects of small and medium sized companies are more volatile than larger companies and may experience higher failure rates than larger companies. Small and medium sized companies normally have a lower trading volume than larger companies, which may tend to make their market price fall more disproportionately than larger companies in response to selling pressures and may have limited markets, product lines, or financial resources and lack management experience. The funds are new with a limited operating history.

All references to tax matters are provided for informational purposes only and should not be considered tax advice and cannot be used for the purpose of avoiding tax penalties. Investors seeking tax advice should consult an independent tax advisor.

The information on this website does not constitute investment advice or a recommendation of any products, strategies, or services. Investors should consult with a financial professional regarding their individual circumstances before making investment decisions. NEOS Funds or its affiliates, nor Foreside Fund Services, LLC, or its affiliates accept any responsibility for loss arising from the use of the information contained herein.

NEOS ETFs are distributed by Foreside Fund Services, LLC.

Definitions:

Option: Options are financial derivatives that give buyers the right, but not the obligation, to buy or sell an underlying asset at an agreed-upon price and date.

Distribution Yield: The annual yield an investor would receive if the most recent fund distribution remained the same going forward. The distribution yield represents a single distribution from the Fund and is not a representation of the Fund's total return. The distribution yield is calculated by multiplying the most recent distribution by 12 in order to annualize it, and then dividing by the Fund's NAV.

30-day SEC Yield: A calculation based on a formula mandated by the Securities and Exchange Commission (SEC) that calculates a fund's hypothetical annualized income, as a percentage of its assets. A security's income, for the purposes of this calculation, is based on the current market yield to maturity (in the case of bonds) or projected dividend yield (for stocks) of the fund's holdings over a trailing 30-day period. This hypothetical income will differ (at times, significantly) from the fund's actual experience; as a result, income distributions from the fund may be higher or lower than implied by the SEC yield.

Tax Loss Harvesting: The timely selling of securities at a loss in order to offset the amount of capital gains tax due on the sale of other securities at a profit.