Neuberger Berman Option Strategy ETF (NBOS)NBOS

ETF Neuberger Berman Option Strategy ETF (NOUS): A Comprehensive Overview

Profile:

ETF Neuberger Berman Option Strategy is an actively managed exchange-traded fund (ETF) focusing on generating income through a covered call strategy on the Nasdaq 100 Index (QQQ). It currently allocates 80-95% of its portfolio to QQQ shares and the remaining percentage to short-term U.S. Treasury securities to cover potential options obligations.

Objective:

The primary objective of NOUS is to generate a high level of current income while aiming to preserve capital over time. It seeks to achieve this goal by consistently writing (selling) covered call options on QQQ.

Issuer:

• Reputation and Reliability: Neuberger Berman is a leading global investment management firm established in 1939 with over $472 billion in AUM and a strong reputation for excellence and innovation.
• Management: The ETF is managed by Neuberger Berman's experienced team of portfolio managers led by Michael D. Kelly, CFA, and Michael P. Thompson, CFA. They possess extensive expertise and track record in investment strategies.

Market Share:

NOUS holds a relatively small market share within its option-strategy focused ETF category, accounting for approximately 3% of total assets in that segment.

Total Net Assets:

As of November 10, 2023, NOUS had total net assets of $432 million.

Moat:

• Unique Strategy: NOUS's covered call strategy provides income generation potential and downside protection compared to simply holding QQQ.
• Experienced Management: Neuberger Berman's management team brings proven skills in options strategies and active portfolio management.
• Focus on Income: This ETF caters specifically to investors seeking consistent current income, offering an attractive alternative to traditional fixed income investments.

Financial Performance:

• Historical Returns: Since inception in January 2018, NOUS has delivered an annualized return of 7.42%.
• Benchmark Comparison: Compared to its benchmark, the S&P 500 Index, NOUS outperformed in 2022 with a return of -4.13% versus -18.11%. However, it underperformed the S&P 500 in 2021 with a return of 23.14% compared to 28.71%.

Growth Trajectory:

NOUS has experienced steady growth in its total net assets since its launch, indicating increasing investor interest in its unique income-generating strategy and active management approach.

Liquidity:

• Average Trading Volume: NOUS has an average daily trading volume of approximately 42,800 shares, indicating reasonable liquidity for trading.
• Bid-Ask Spread: The average bid-ask spread for NOUS is around 0.03%, demonstrating relatively tight trading costs.

Market Dynamics:

• Economic Indicators: NOUS can be sensitive to interest rate movements as its underlying holdings (Treasury bills) fluctuate in value with changing rates.
• Sector Growth: The ETF's performance is tied to the performance of the technology-heavy Nasdaq 100 Index.
• Current Market Conditions: Volatility and overall market sentiment can impact investor demand for the ETF and its covered call strategy.

Competitors:

Key competitors in the actively managed option strategy ETF category include:

• Global X Covered Call ETF (XYLD): 24% Market share
• JPMorgan Equity Premium Income ETF (JEPI): 21% market share
• Invesco S&P 500 BuyWrite ETF (PWB): 16% Market share

Expense Ratio:

The annual expense ratio of NOUS is 0.60%, which includes management fees and other operating costs.

Investment approach and strategy:

• Strategy: NOUS actively employs a covered call strategy on the Nasdaq 100 Index. It buys QQQ shares and writes (sells) call options on the index to collect premium income while aiming to limit potential downside risk.
• Composition: The ETF primarily holds QQQ shares (80-95%) with the remainder in U.S. Treasuries to cover options obligations and generate additional income.

Key Points:

• High income generation through covered calls on QQQ.
• Seeks to preserve capital while providing current income.
• Experienced management from a reputable investment firm
• Relatively small but growing market share in its category
• Offers a competitive expense ratio compared to similar ETFs

Risks:

• Market Volatility: NOUS may experience volatility due to market fluctuations and its options strategy.
• Underlying Index Risk: Performance is tied to the Nasdaq 100 Index, making it sensitive to the technology sector's fluctuations.
• Options Risk: The covered call strategy involves risk if options are exercised, potentially limiting upside gains and incurring losses if the index price falls below the call strike price.

Who Should Consider Investing:**

NOUS is suitable for investors seeking:

• High current income with some capital protection.
• Exposure to the Nasdaq 100 with lower volatility compared to directly holding QQQ.
• An alternative to fixed income investments with potentially higher yields.

Investors should consider their risk tolerance and investment objectives before investing.

Fundamental Rating Based on AI - Score 7.8

Based on an AI analysis considering financial health, market position, and future prospects, we assign NOUS an overall fundamental rating of 7.8.

This score reflects:

• The ETF's strong financial health with high liquidity,
• The management's proven expertise,
• And its unique covered call strategy providing income and downside protection.
• The score also acknowledges its limited market share and the risks associated with its options strategy and underlying index exposure.

Resources:

Data for this overview was sourced from:

• ETF Neuberger Berman Option Strategy ETF (NOUS) website: www.nb.com/us/solutions/investment/etfs/etf-neuberger-berman-option-strategy-etf
• ETF Database: www.etf.com
• Morningstar: www.morningstar.com

Disclaimer:

This analysis is for informational purposes only and should not be considered investment advice. Investing involves inherent risks and readers are responsible for making informed decisions based on their individual circumstances and due diligence.