Why NBOS May Be a Better Options Income Bet

Core Insights - The rise in interest rates in 2022 has led income-seeking investors to increasingly adopt options-based strategies, particularly ETFs [1][2] Group 1: Options-Based Strategies - Options income ETFs provide uncorrelated income, making them less sensitive to Federal Reserve policies [2] - The majority of legacy and some newer ETFs in this category are covered call funds, which generate income by selling call options [2] Group 2: Neuberger Berman Option Strategy ETF (NBOS) - NBOS, which transitioned to an ETF in January 2024, operates as a putwrite fund, selling puts instead of calls [3] - For the 12 months ending October 20, NBOS gained 3.54%, while the largest legacy covered call ETF declined by 4.36% [3] - As of September 30, NBOS had a trailing 12-month distribution rate of 7.40% and is up 8.40% year-to-date [4] Group 3: Advantages of Putwrite Strategies - Putwrite strategies like NBOS may offer greater upside capture compared to covered call ETFs, allowing for potential appreciation without sacrificing future gains [6] - NBOS can provide downside protection comparable to or exceeding that of covered call ETFs, which is often a key selling point for those funds [6] - The behavioral finance aspect indicates that puts are generally more expensive than calls, allowing NBOS to generate higher income by selling premium options [7]