An ETN for Golden Income

04/21/2017 2:50 am EST


Ron Rowland

Editor, All Star Fund Trader

One of the criticisms about investing in gold is that gold doesn’t pay any dividends. However, that is old-school thinking, because, for the past four years, it has been easy for investors to get exposure to gold while receiving income from the same investment. 

The CS X-Links Gold Shares Covered Call ETN (GLDI) is an exchange-traded note issued by Credit Suisse. ETNs are similar to ETFs in that they have a share creation/redemption mechanism to meet investor demand and to arbitrage the trading price to the underlying net asset value. 

However, ETNs are bonds (debt obligations) of the issuer (Credit Suisse in the case of GLDI) and therefore carry additional credit risk.

GLDI’s daily return is linked to the performance of the Credit Suisse NASDAQ Gold FLOWS 103 Index, which implements a “covered call” strategy by taking a long position in SPDR Gold Shares (GLD) and then selling call options on its position that are approximately 3% out of the money. 

The income received from selling the calls is paid monthly, and these payments are currently producing an annualized yield of 8.2%. GLDI has an expense ratio of 0.65%, and the Global Multi-Asset Income model is buying it today.

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