ETF Talk: Knowing Your Options

Savvy investors have long taken advantage of the remarkable profits that options can produce in their investment portfolios. But what you may not know is that investing in options is now as easy as choosing the right exchange-traded funds (ETFs).

If you want to invest in ETFs that actually invest using options, you are in luck. The table below lists many of the ETFs that employ options to enhance investor returns.

One thing to note about ETFs that feature options is that such investments ideally should have a daily trading volume of at least 100,000 shares. Without such volume, an investor runs the risk of not having a liquid enough holding to buy or sell at a reasonable price. Since options inherently are risky, ETFs that focus on the niche must be regarded with caution, especially for inexperienced investors.

For seasoned investors who want exposure to options, ETFs that specialize in such offerings are worth considering. I have yet to recommend any ETFs that specialize in options but I have had success in buying put options on the iShares FTES/Xinhau China 25 Index.

Three different put options that I’ve recommended in my ETF Trader advisory service generated double-digit percentage gains within the past year, so I know first hand that you can make a bundle of money using options. I will be monitoring the ETF option funds listed above for performance and trading volume, as they can be a great way to increase the overall performance of an aggressive investor’s portfolio.