Introduction
REX Financial has launched a new single-stock exchange-traded fund (ETF) linked to Nvidia, the leading chipmaker that has significantly influenced stock market gains over the past two years.
Context
The REX NVDA Growth & Income ETF, introduced on Wednesday morning, employs a covered call strategy that utilizes options to generate income while simultaneously allowing investors to benefit from a portion of Nvidia's potential stock price increase. This dual approach aims to appeal to investors by providing both stability and income.
Expert Insights
Scott Acheychek, REX's chief operating officer, expressed confidence in the new product, stating that it enables investors to maintain their preferred stock investments while managing risk and earning weekly income through options sales.
Market Trends
Since their introduction in late 2023, single-stock option-based ETFs have amassed nearly $10 billion in total assets. The popularity of single-stock ETFs, which encompasses leveraged products, continues to rise, according to Bryan Armour, an ETF analyst at Morningstar. He noted that the primary audience for these products consists of self-directed individual investors.
Investment Considerations
Armour pointed out that while this ETF structure may outperform the underlying stock when that stock remains flat or declines, it could be more beneficial for investors to consider either purchasing individual stocks directly or exploring options-based ETF strategies linked to a diversified portfolio. He cautioned that the product does not primarily seek to maximize growth or income.
Developments
Acheychek noted that the innovative approach to covered call single-stock ETFs is designed for investors who are increasingly interested in alternative income-generating options.
Conclusion
As Nvidia shares closed at $134.81, reflecting a slight decline of 0.5%, anticipation builds for the company's upcoming earnings announcement, which could further impact investor interest in this newly launched ETF.