Why It May Be Time for a New Income Opportunity

The Fed's recent decision to cut interest rates by 0.50% has been cheered on by equity markets. But with the prospect of further cuts on the horizon, fixed income yields are poised to decline, introducing a familiar challenge. As investors weigh the classic trade-off between upside and generating income, we suggest considering a new alternative.

Thanks to a recent innovation in the daily options market, investors now can target high income potential in the short-term, while also seeking the long-term returns of large-cap benchmarks. Take the S&P 500 Daily Covered Call Index, for instance. It has offered distributions in line with a traditional covered call benchmark, while participating in far more upside as stocks have rallied.

The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when sold or redeemed, may be worth more or less than the original cost. Shares are bought and sold at market price (not NAV) and are not individually redeemed from the fund. Market price returns are based upon the midpoint of the bid/ask spread at 4:00 p.m. ET (when NAV is normally determined for most funds) and do not represent the returns you would receive if you traded shares at other times. Your brokerage commissions will reduce returns. Current performance may be lower or higher than the performance quoted. For standardized returns and performance data current to the most recent month end, call 866.776.5125 or visit ProShares.com.

Index returns are for illustrative purposes only and do not represent actual fund performance. Index returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.

Interested in learning more?

Our Global Investment Strategist, Simeon Hyman, CFA, breaks down this innovation. Alternatively, investors might be interested in exploring the following ETFs:

1. Trailing 12-month distribution rate sourced from Bloomberg and Morningstar. Annualized distribution rate is shown for S&P 500 Daily Covered Call Index, sourced from ProShares. The Annualized Distribution Rate is the annualized payout, expressed as a percentage of NAV, that an investor would receive, assuming the latest monthly distribution remained the same over the next 12 months. Distributions include return of capital, as well as ordinary dividends and capital gains. See 19a-1 notice for estimated percentage of return of capital. Distributions will reduce the NAV by the amount of the distribution. The Annualized Distribution Rate reflects a single distribution only and does not indicate total returns or any other distribution. Future distributions may differ significantly from the latest distribution and are not guaranteed. Actual sources of the distributions may vary at the end of the year and will be provided in a Form 1099-DIV.

2. Source: ProShares study group composed of 17 U.S. large-cap equity covered call ETFs with more than one year of performance history and at least $20mm in assets under management. The group utilizes covered call strategies based on the S&P 500 (11 of 17), the Nasdaq-100 (4 of 17), and Dow Jones Industrial (2 of 17) indexes. The group represents 90% of ETF assets under management in Morningstar's Derivative Income category. Data as of 8/31/24. Index returns are for illustrative purposes only and do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged, and one cannot invest directly in an index. Past performance does not guarantee future results.

3. The fund has very limited performance history, which should not be taken as an indication of future performance.

This material is not intended to be tax or investment advice. Tax consequences may vary by individual taxpayer. For specific tax advice, we recommend you speak with a qualified tax professional.

Investing involves risk, including the possible loss of principal. These ProShares ETFs are non-diversified and entail certain risks, including risks associated with the use of derivatives (swap agreements, futures contracts and similar instruments), investments in smaller companies, imperfect benchmark correlation and market price variance, all of which can increase volatility and decrease performance. Please see summary and full prospectuses for a more complete description of risks on ProShares.com. Shares of any ETF are generally bought and sold at market price (not NAV) and are not individually redeemed from the fund. Your brokerage commissions will reduce returns.

There is no guarantee any ProShares ETF will achieve its investment objective. The performance of the funds may not correspond to the performance of their respective indexes, the funds may not be successful in generating income for investors, and the funds may not capture returns that traditional covered call strategies may sacrifice.

Each fund replicates the performance of a covered call investment strategy that combines a long position in the respective index with a short position in the index’s call options. In particular, each index is designed to replicate a daily covered call strategy that sells call options with one day to expiration each day.

Each fund intends to make distributions each month of an amount that reflects the dividends and call premium income earned by a daily covered call strategy on its respective index (net of expenses). There can be no guarantee that the funds will make distributions and the amount of such distributions, if any, may vary significantly from month to month. Some of all of such distributions may be characterized as return of capital.

The S&P 500 Daily Covered Call Index is a product of S&P Dow Jones Indices LLC and its affiliates and has been licensed for use by ProShares. "S&P®" is a registered trademark of Standard & Poor's Financial Services LLC ("S&P") and "Dow Jones®" is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones") and have been licensed for use by S&P Dow Jones Indices LLC and its affiliates. ProShares have not been passed on by S&P Dow Jones Indices LLC and its affiliates as to their legality or suitability. ProShares based on the S&P 500 Daily Covered Call Index are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P or their respective affiliates, and they make no representation regarding the advisability of investing in ProShares. THESE ENTITIES AND THEIR AFFILIATES MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO PROSHARES.

Carefully consider the investment objectives, risks, charges and expenses of ProShares before investing. This and other information can be found in their summary and full prospectuses at ProShares.com.

ProShares are distributed by SEI Investments Distribution Co. ("SIDCO"), which is not affiliated with the fund's advisor or sponsor. SIDCO is located at 1 Freedom Valley Drive, Oaks, PA 19456.