High Yields/Low Risk: PowerShares S&P 500 Buy/Write Portfolio ETF
10/31 Yield: 10.28%
Expense Ratio: 0.75%
If you like higher-than-average payouts and are willing to adapt when the market’s environment changes, then the PowerShares S&P 500 Buy/Write Portfolio ETF (NYSE:PBP) might be a better fit than a high-yield bond fund. The portfolio employs an option-trading strategy where stocks are purchased, then it sells call options against those stocks.
There’s a caveat, however. While the trailing yield of 10.28% is juicy, the fund has only managed to issue those kinds of payouts because the market environment has been volatile but indecisive. If the market starts to trend convincingly — even if slowly — the call-writing strategy starts to sputter, and PBP actually could underperform the broader market.