Credit Suisse has launched a new exchange-traded note (ETN) that offers investors exposure to the performance of gold in addition to monthly income distributions.

Greg King, Head of ETPs at Credit Suisse.

Listed on the Nasdaq exchange, the Credit Suisse Gold Shares Covered Call ETN (GLDI) becomes the first exchange-traded product in the US to deploy a covered call strategy on gold.

The ETN is linked to the Credit Suisse Nasdaq Gold FLOWS 103 Index (FLOWS stands for Formula Linked Over Write Strategy), an index reflecting a hypothetical rolling covered call (also known as buy-write) strategy on a notional long position in SPDR Gold Shares (GLD) while notionally selling monthly out-of-the-money call options on that position with a strike price of approximately 103% of the price of GLD.

The benefit of this strategy is that it generates periodic cash income in the form of option premiums that a direct long-only ownership position in GLD would not. The average annualised income distributions of the strategy currently stand at 9.45%. In turn, this income provides a limited offset to potential losses from downside market performance in the price of GLD. However, the sale of call options does limit potential upside participation in the performance of GLD.

Commenting on the launch, Greg King, head of ETPs in Credit Suisse’s investment bank, said: “Gold is often criticised as a portfolio investment because of its lack of any yield. Covered call strategies, however, are designed to enhance yield in exchange for sacrificing part of the upside of an investment position. GLDI seeks to provide investors and their advisors an interesting new way to introduce monthly cash flows into their portfolios.”

Credit Suisse partnered with Nasdaq OMX in creating the FLOWS suite of indices that the ETN tracks.

Robert Hughes, Vice President, Nasdaq OMX Global Indexes, said: “We are elated that the Credit Suisse Gold FLOWS 103 Index ETN has listed on the Nasdaq stockmarket and is now available to investors. Based on uncertainty in the global marketplace, investors continue to look for access to gold and income. GLDI provides access to these two key investment themes in a transparent rules-based methodology.”

The ETN charges an annual fee of 0.65%.