Kiwoom Asset Management introduces a product that combines the world's first 'Protective Put' replication strategy with U.S. technology stock exchange-traded funds (ETFs).
Kiwoom Asset Management announced that it will list the 'KIWOOM U.S. Tech 100 Monthly Target Hedge Active' ETF on the 22nd. Kiwoom Asset Management explained that it was designed to meet demand for avoiding losses while pursuing revenue through concentrated investments in representative U.S. technology stocks.
The Protective Put strategy involves buying a put option that generates revenue when the stock price falls below a certain strike price after purchasing the stock. It is the opposite of the covered call strategy.
The KIWOOM U.S. Tech 100 Monthly Target Hedge Active utilizes a 'delta hedge' technique that replicates option effects by adjusting the ratio of stocks and bonds instead of directly buying put options.
On the 1st of each month, the end-of-month closing price (based on the U.S. market) is set as a type of revenue preservation target known as the 'monthly target defense line,' and during the month, the asset ratio is adjusted to minimize the probability of the revenue falling below that defense line by checking the market daily. In a bull market, the stock ratio can be expanded to a maximum of 95%.
The stock assets utilize an ETF tracking the NASDAQ 100 index listed in the U.S., while the bond assets use U.S. short-term Government Bonds ETF as a safe asset. Part of the NASDAQ 100 index futures is used when adjusting the asset proportions.
Kiwoom Asset Management explained that this delta hedge technique can reduce unnecessary option expenses in bull or sideways markets, thereby addressing the weaknesses of the existing Protective Put strategy.
Kiwoom Asset Management also noted that the design automatically reduces the proportion of risky assets in the event of a sharp drop in stock prices and increases the ratio again when stock prices recover, which is expected to lower psychological anxiety and risk of loss for investors during crisis situations.
However, as it is a currency-exposed product, in a situation where the exchange rate of the Korean won against the U.S. dollar sharply declines, the drop may be greater than the target defense line.
The KIWOOM U.S. Tech 100 Monthly Target Hedge Active is also a monthly dividend ETF that utilizes dividend revenues generated from U.S. technology stocks and interest income from U.S. short-term bonds to pay dividends based on the last day of each month.
The KIWOOM U.S. Tech 100 Monthly Target Hedge Active is the first ETF product introduced by Kiwoom Asset Management since the rebranding and the joining of Lee Kyung-jun, head of the ETF management division.
The head of the division noted that 'KIWOOM U.S. Tech 100 Monthly Target Hedge Active is a strategic product focused on balancing 'loss avoidance' and 'revenue participation,' which investors prioritize most,' adding that 'individual investors can easily utilize risk management strategies mainly used by institutional investors such as hedge funds to seek stable investments in uncertain markets.'
He added that 'since actual options are not used, it can also be invested in retirement accounts,' stating that 'it is a strategy that mechanically performs dollar-cost averaging and dollar-cost selling using option theory, making it a medium-risk, medium-revenue product suitable for risk-averse investors.'