Roundhill Investments, an ETF sponsor known for its innovative financial products, has announced the latest weekly ETF distributions for two of its funds: the Roundhill S&P 500 0DTE Covered Call Strategy ETF (XDTE) and the Roundhill N-100 0DTE Covered Call Strategy ETF (QDTE).
Established in 2018, Roundhill Investments is an SEC-registered investment advisor specializing in innovative exchange-traded funds. The company’s suite of ETFs provides investors with unique and differentiated exposures to various asset classes, including thematic equity, options income, and trading vehicles.
Roundhill’s team boasts extensive ETF knowledge and experience, having collectively launched over 100 ETFs, including several first-to-market products. For more information about Roundhill Investments and its offerings, visit their website at roundhillinvestments.com.
It’s important to note that these funds are subject to various risks, including options risk, liquidity risk, market risk, cost of futures investment risk, clearing broker risk, commodity regulatory risk, futures contract risk, active management risk, active market risk, clearing broker risk, credit risk, derivatives risk, legislation and litigation risk, operational risk, trading issues risk, valuation risk, and non-diversification risk. For a detailed description of these risks, please refer to the fund prospectus.
A covered call strategy involves writing (selling) covered call options in exchange for receiving premiums. The seller of the option gives up the potential to profit from price increases in the underlying instrument above the exercise price of the options but continues to bear the risk of underlying instrument price declines. The premiums received from the options may not be sufficient to offset any losses sustained from underlying instrument price declines over time.
As a result, the risks associated with writing covered call options may be comparable to the risks associated with writing put options. Exchanges have the authority to suspend the trading of options during periods of unusual market volatility. If trading is suspended, option sellers may be unable to sell options at a time that may be desirable or advantageous.
The Fund utilizes FLEX Options issued and guaranteed for settlement by the Options Clearing Corporation (OCC). In the unlikely event that the OCC becomes insolvent or is otherwise unable to fulfill its settlement obligations, the Fund could incur significant losses. Additionally, FLEX Options may exhibit lower liquidity compared to standard options. In a less liquid market for FLEX Options, the Fund may face difficulties closing out certain FLEX Options positions at desired times and prices.
The values of FLEX Options do not increase or decrease at the same rate as the reference asset and may vary due to factors other than the price of the reference asset. The Fund’s utilization of zero days to expiration, known as “0DTE” options, introduces additional risks. Due to their short time until expiration, 0DTE options are more sensitive to sudden price movements and market volatility compared to options with more time until expiration.
Because of this, the timing of trades involving 0DTE options becomes more critical. Although the Fund intends to enter into 0DTE options trades at market open or shortly thereafter, even a slight delay in the execution of these trades can significantly impact the trade’s outcome.
Such options may also suffer from low liquidity, making it more difficult for the Fund to enter into its positions each morning at desired prices. The bid-ask spreads on 0DTE options can be wider than with traditional options, increasing the Fund’s transaction costs and negatively affecting its returns.
Additionally, the proliferation of 0DTE options is a relatively new phenomenon and may therefore be subject to rule changes and operational frictions. To the extent that the OCC enacts new rules relating to 0DTE options that make it impractical or impossible for the Fund to utilize 0DTE options to effectuate its investment strategy, it may instead utilize options with the shortest remaining maturity available or it may utilize swap agreements to provide the desired exposure.
Roundhill Financial Inc. serves as the investment advisor for these funds. The Funds are distributed by Foreside Fund Services, LLC, which is not affiliated with Roundhill Financial Inc., U.S. Bank, or any of their affiliates.
