Innovator ETFs continues to push the boundaries of income-focused exchange-traded fund (ETF) solutions with strategies tailored to real advisor needs. The recently launched Equity Premium Income – Daily PutWrite ETF (ticker: SPUT) represents the latest addition to Innovator’s extensive lineup of options-based ETFs. The fund aims to deliver capital appreciation potential alongside meaningful monthly income—a combination that may prove particularly attractive in today’s market.
In an interview with The Wealth Advisor’s Scott Martin, Joe Becker, Director of Product Management at Innovator ETFs, discussed how SPUT provides a distinctive approach to generating income through its daily put-writing strategy, the potential structural advantages of its option methodology, and how advisors might position the fund alongside existing income solutions in client portfolios.
Understanding the SPUT Strategy
Unlike many popular derivative income strategies in the market, particularly covered call ETFs, which have dominated the derivative income space, SPUT takes a fundamentally different approach to generating income while maintaining exposure to equity markets.
Becker positions SPUT within the broader derivative income universe, noting the significant growth in this space over recent years. Although the Innovator strategy shares similarities with covered call funds by holding equities and selling options for income, he notes that with SPUT, “instead of selling calls, it is selling puts.”
Daily Put-Writing: A Systematic Potential Advantage
SPUT’s daily put-writing strategy is designed to offer several benefits over the monthly options approaches most income-focused option funds typically deploy. As Becker explains, the strategy sells a put option on the S&P 500 every day, seeking to limit risk exposure to just a single day for each option. Specifically, the fund targets 5 delta put options, which are believed to have only a 5% probability of expiring in the money, when the contract will experience a loss.
“As investors who are selling options for income, we don’t want our option to expire in the money,” Becker says. “We want it to expire out of the money. So, by virtue of its being a 5 delta option, it is expected to have a 95% chance of expiring out of the money.”
The daily approach is intended to allow SPUT to keep pace with changing market conditions. “Every day, it’s a new 5 delta option. Wherever the market moves, that strike price is moving every day in response to new market conditions,” he adds. This flexibility is designed to help the strategy adapt to market volatility while maintaining its defined risk parameters.
In addition, Becker notes that writing puts daily throughout a month, in normal market conditions, typically generates more premium income than writing a single monthly put option, potentially enhancing the strategy’s income potential.
This systematic approach to writing daily puts with a specific delta target seeks to provide structural safeguards that would be challenging for individual investors to replicate consistently. Innovator’s expertise in the derivatives ETFs space—the firm was founded to offer options-based funds, Becker notes—makes SPUT potentially particularly valuable for advisors looking to implement such a put-writing strategy without the operational complexity of managing daily options trading.
Enhanced Income Potential Through Put Premium
Put options often offer advantageous pricing dynamics that SPUT is designed to capture, potentially leading to enhanced income compared to similar call-based strategies.
“In normal market conditions, if you were to take a 5 delta put and compare it with a 5 delta call, that put generally would pay a higher premium than you would get for the call,” Becker explains, highlighting one of the key attractions of the put-writing approach.
The combination of daily put-writing and the selection of options with specific delta characteristics allows SPUT to potentially generate meaningful income while maintaining a high probability that the options will expire worthless. By seeking to systematically capture option premiums while simultaneously managing assignment risk, the strategy aims to create an income stream with defined risk parameters.
Balanced Approach: Growth Potential and Income
Unlike some income-oriented strategies that may sacrifice growth potential for yield, SPUT maintains meaningful equity exposure alongside its income-generating capabilities.
“The equity component in the fund will be 50% of the portfolio’s weight,” Becker emphasizes. “And one thing that we like about writing puts is that these puts are sold below the current market level. So, unlike covered calls, if you’re writing covered calls and holding equities, that equity allocation hits a cap in some sense, when it hits the call strike. Here, because we’re dealing with puts at strikes below the market, our equity allocation is uncapped.”
For advisors balancing growth and income objectives in client portfolios, strategies designed to offer both components without sacrificing either may prove particularly valuable in making allocation decisions.
Portfolio Implementation Considerations
Advisors can incorporate SPUT into portfolios in multiple ways, depending on client objectives and existing allocations. Becker views SPUT as potentially compatible with existing derivative income strategies. He notes that for advisors who already utilize covered call exposure in their portfolios, SPUT may serve as an effective complement. “You could add this to generate income from puts being written below the market level and potentially see those two things work in tandem to generate monthly income,” he says.
The strategy may also offer risk management benefits. “Adding a strategy like that to an equity allocation may help to reduce risk,” Becker notes. “That’s what we have seen as we’ve looked at this strategy: it seeks to reduce volatility, and its construction may generate a meaningful level of monthly income as well.”
Whether the goal is diversifying income sources, managing volatility, or enhancing an existing options-based strategy, SPUT aims to offer a flexible tool for portfolio construction.
Expertise and Ease of Implementation
The complexities of daily options trading represent a significant barrier for advisors attempting to implement similar strategies independently, making SPUT’s packaged approach particularly intriguing.
With a foundation built on options-based ETFs and a current lineup of more than 150 funds, Innovator brings substantial experience in building derivatives ETFs to the table. Rather than managing daily options trades, advisors may wish to integrate SPUT into client portfolios, focusing on broader strategy considerations while seeking to benefit from a systematic, rules-based methodology for income generation.
“To try to sell a put every day, you have to be very diligent and make the time to do that if you’re doing that on your own,” Becker says. “So, we think this is a convenient way for investors to access a strategy like this and just kind of set it and forget it, so to speak.”
The institutional expertise behind SPUT’s daily options trading operations provides advisors with access to a derivative strategy without the operational demands of implementing similar approaches independently.
Expanding the Derivative Income Toolkit
As advisors continue seeking solutions that balance income needs with growth potential, Innovator’s SPUT ETF represents a distinctive approach through its daily put-writing strategy. The fund’s combination of uncapped equity participation, systematic put-writing with defined probability characteristics, and the potential for meaningful monthly income aims to offer a compelling alternative to traditional covered call strategies.
SPUT is designed to provide advisors with a professionally managed solution that would be demanding to replicate independently. Whether used as a complement to existing derivative income strategies or as a stand-alone allocation aimed at reducing portfolio volatility while generating income, SPUT exemplifies how continued innovation in the ETF space is creating new possibilities for portfolio construction.
__________________________
Additional Resources
__________________________
Definitions and Disclosures
Put: An option contract that provides the buyer the right (but not the obligation) to sell a specified amount of an underlying security at a predetermined price. Call: An option contract that provides the buyer the right (but not the obligation) to buy a specified amount of an underlying security at a predetermined price. Covered Call: A strategy that involves holding a long position in a security and selling a call option on that security in seeking to realize additional income from the option premium. Delta: a theoretical estimate of the sensitivity of an option’s price to changes in its underlying security’s price.
The Fund seeks to provide current income while providing the potential for capital appreciation. The Fund’s income is expected to be received primarily from its purchases of Equity-Linked Notes (ELNs) that implement a put-write option strategy. The ELNs provide the Fund with monthly distributions comprised of premiums generated from selling single-day expiration, out of the money put option contracts on the S&P 500 Price Return Index (SPX) that provides exposure to approximately 100% of the Fund’s assets. The Fund also expects to receive income generated by its investments in U.S. Treasuries and dividends, if any, from its investments equity securities primarily comprising components of the Solactive GBS United States 500 Index (U.S. Equity Index). The Fund’s investments in equity securities also seek to provide the potential for capital appreciation.
The Fund will also be subject to the downside performance of the U.S. Equity Index and SPX through its respective holdings in equity securities and ELNs. The Fund’s monthly income payments to investors may not be sufficient to offset any such losses on a total return basis. There can be no guarantee that the Fund will be successful in its objective to provide current income while maintaining the potential for capital appreciation.
Equity-Linked Notes Risk. Investing in ELNs may be more costly to the Fund than if the Fund had invested in the underlying instruments directly. Investments in ELNs often have risks similar to the underlying instruments, which include market risk. In addition, since ELNs are in note form, ELNs are subject to risks of debt securities, such as credit and counterparty risk, including the risk that issuers and/or counterparties will fail to make payments when due or default completely. Should the prices of the underlying instruments move in an unexpected manner, the Fund may not achieve the anticipated benefits of an investment in an ELN, and may realize losses, which could be significant and could include the Fund’s entire principal investment. However, the Fund’s exposure to losses in its investments in the ELNs is limited to its principal investment in such ELNs. Investments in ELNs are also subject to liquidity risk, which may make ELNs difficult to sell and value. A lack of liquidity may also cause the value of the ELN to decline. In addition, ELNs may exhibit price behavior that does not correlate with the underlying securities.
Put-Write Risk. Put option contracts may be subject to volatile swings in price influenced by the underlying reference asset. Although the Fund receives premiums on the put option contracts written by the ELN, the losses experienced by the Fund if the level of SPX falls below the strike price may outweigh Fund gains from the receipt of the option premiums. With respect to the Fund’s investment in ELNs, the Fund’s returns are limited to the amount of option premiums it receives. Additionally, market conditions may negatively impact the amount of premiums received from selling put-write option contracts or impact the selected strike price of the option contracts, subjecting the Fund to more risk of loss.
Put-Write Index. The ELNs in which the Fund will invest will provide leveraged exposure to an index or indices that implements the options strategy and the performance of a portfolio of the daily put contracts (Put-Write Index). The Put-Write Index sells one-day maturity put option contracts on SPX on a daily basis that generally seeks to provide income through premiums received. The Put-Write Index subjects the ELNs, and therefore the Fund, to the risk of loss associated with price decreases of SPX below the strike price. If the Put- Write Index experiences any losses based off the price movements of SPX, as a result of the 100% notional value utilized by the Put-Write Index, the losses incurred by the ELNs the Fund invests in will be greater than those experienced by SPX.
While the Put-Write Index seeks to minimize the risk associated with the written put option contracts, the Put-Write Index and ELNs subject the Fund to risk of loss, including the risk that the Fund may lose the entirety of its principal amount invested in an ELN.
Investing involves risk. Principal loss is possible. Innovator ETFs are distributed by Foreside Fund Services, LLC.
The Fund’s investment objectives, risks, charges and expenses should be considered carefully before investing. The prospectus and summary prospectus contain this and other important information, and it may be obtained at innovatoretfs.com. Read it carefully before investing.
This material does not constitute investment or tax advice. Readers should consult with their tax professionals and investment advisers for tax and investment advice, respectively, and not rely upon information disseminated by Innovator. Past distributions are not indicative of future distributions. Transactions in ETF shares may result in brokerage commissions and generate tax consequences. Investors should consider their current and anticipated investment horizon and income tax bracket when making an investment decision as descriptions herein do not reflect these factors. This material is provided for informational purposes only. Evaluations of market conditions are as of the date indicated, are subject to change without notice, and are not intended to be a forecast of investment outcomes.
The following marks: Accelerated ETFs®, Accelerated Plus ETF®, Accelerated Return ETFs®, Barrier ETF®, Buffer ETF™, Defined Income ETF™, Defined Outcome Bond ETF®, Defined Outcome ETFs™, Defined Protection ETF®, Define Your Future®, Enhanced ETF™, Floor ETF®, Innovator ETFs®, Leading the Defined Outcome ETF Revolution™, Managed Buffer ETFs®, Managed Outcome ETFs®, Step-Up™, Step-Up ETFs®, 100% Buffer ETFs™ and all related names, logos, product and service names, designs, and slogans are the trademarks of Innovator Capital Management, LLC, its affiliates or licensors. Use of these terms is strictly prohibited without proper written authorization.
Copyright © 2025 Innovator Capital Management, LLC. All rights reserved
