While options overlays may cap potential upside for ETF investors, experts see a major risk management benefit.
While some investors are concerned that exchange-traded funds with options overlays could limit returns, experts see a key benefit at play.
Morgan Stanley’s global head of ETFs Tony Rochte suggests that hedging strategies like options — serving as a bet against a fund’s equity position — also protect against significant losses.
“They might be capped on the upside, but they’re certainly capping their downside protection as well,” he told CNBC’s “ETF Edge.” “This is really getting people off the sidelines, back into the broad-based equity market.
