KraneShares Launches KLIP: A Volatility-Driven Income Strategy ETF for China Investors

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KraneShares, an investment firm, has introduced a unique strategy to generate income for investors using volatility. The firm’s flagship ETF, the KraneShares CSI China Internet ETF (KWEB), is designed to capture the growth opportunity in China but is known for its volatility. In response to investors’ desire for an income-focused counterpart to KWEB, KraneShares created the KraneShares China Internet and Covered Call Strategy ETF (KLIP). This ETF invests in KWEB and writes at-the-money calls over a 30 to 40-day period to maximize option income. KLIP has been paying out an average of 4.5% per month to investors over the last nine months. The level of option income generated is directly related to the volatility of the underlying investment. Currently, volatility is slightly elevated, resulting in income in the 4% to 5% range. However, even in a lower volatility environment, KLIP has the potential to generate attractive income for investors. If volatility increases, the income potential also rises. Overall, this strategy allows investors to monetize the volatility in China and generate consistent income.

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