Roundhill Investments Launches Small Cap 0DTE Covered Call Strategy ETF (RDTE)

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Sep 10, 2024, 08:00 ET

RDTE sells zero-days-to-expiry ("0DTE") options each day to seek income generation. The fund seeks to pay weekly distributions to fund shareholders.

NEW YORK, Sept. 10, 2024 /PRNewswire/ -- Roundhill Investments, an ETF sponsor focused on innovative financial products, is pleased to announce the launch of the Roundhill Small Cap 0DTE Covered Call Strategy ETF (RDTE), which begins trading on Cboe BZX today.

RDTE joins Roundhill's growing suite of weekly-pay income funds, including the Roundhill S&P® 500 0DTE Covered Call Strategy ETF (XDTE) and the Roundhill Innovation-100 0DTE Covered Call Strategy ETF (QDTE). Following the introduction of RDTE, Roundhill now offers its innovative 0DTE covered call strategy across all three major U.S. equity indices.

"Following the successful launches of QDTE and XDTE, we've received significant demand from investors for a small cap version," said Dave Mazza, Chief Executive Officer at Roundhill Investments. "As the market broadens out and small caps continue to participate, RDTE provides a tool for investors looking to generate attractive weekly income potential alongside their equity exposure."

About Roundhill Investments:

Founded in 2018, Roundhill Investments is an SEC-registered investment advisor focused on innovative exchange-traded funds. Roundhill's suite of ETFs offers distinct and differentiated exposures across thematic equity, options income, and trading vehicles. Roundhill offers a depth of ETF knowledge and experience, as the team has collectively launched more than 100+ ETFs including several first-to-market products. To learn more about the company, please visit roundhillinvestments.com.

Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. For a prospectus or summary prospectus, if available, with this and other information about the Fund, please call 1-855-561-5728 or visit our website at https://www.roundhillinvestments.com/etf/RDTE. Read the prospectus or summary prospectus carefully before investing.

All investing involves risk, including the risk of loss of principal. There is no guarantee the investment strategy will be successful. For a detailed list of fund risks see the prospectus.

Covered Call Strategy Risk. A covered call strategy involves writing (selling) covered call options in return for the receipt of premiums. The seller of the option gives up the opportunity to benefit from price increases in the underlying instrument above the exercise price of the options, but continues to bear the risk of underlying instrument price declines. The premiums received from the options may not be sufficient to offset any losses sustained from underlying instrument price declines. Exchanges may suspend the trading of options during periods of abnormal market volatility. Suspension of trading may mean that an option seller is unable to sell options at a time that may be desirable or advantageous to do so.

Additionally, the Fund is a "synthetic" covered call strategy, meaning that it derives its long exposure to the Small Cap Index from options that utilize the Small Cap Index as the reference asset. This synthetic exposure increases the likelihood that the Fund's returns may not always precisely align with the returns of the Small Cap Index.

Options Risk. The use of options involves investment strategies and risks different from those associated with ordinary portfolio securities transactions and depends on the ability of the Fund's portfolio managers to forecast market movements correctly. The prices of options are volatile and are influenced by, among other things, actual and anticipated changes in the value of the underlying instrument, or in interest or currency exchange rates, including the anticipated volatility, which in turn are affected by fiscal and monetary policies and by national and international political and economic events. The effective use of options also depends on the Fund's ability to terminate option positions at times deemed desirable to do so. There is no assurance that the Fund will be able to effect closing transactions at any particular time or at an acceptable price. In addition, there may at times be an imperfect correlation between the movement in values of options and their underlying securities and there may at times not be a liquid secondary market for certain options. Lastly, the trading of options is subject to transaction costs that may impact the Fund's returns.

FLEX Options Risk. Trading FLEX Options involves risks different from, or possibly greater than, the risks associated with investing directly in securities. The Fund may experience losses from specific FLEX Option positions and certain FLEX Option positions may expire worthless. The FLEX Options are listed on an exchange; however, no one can guarantee that a liquid secondary trading market will exist for the FLEX Options.

0DTE Options Risk.*** The Fund's use of zero days to expiration, known as "0DTE" options, presents additional risks. Due to the short time until their expiration, 0DTE options are more sensitive to sudden price movements and market volatility than options with more time until expiration. Because of this, the timing of trades utilizing 0DTE options becomes more critical. Although the Fund intends to enter into 0DTE options trades on market open, or shortly thereafter, even a slight delay in the execution of these trades can significantly impact the outcome of the trade. Such options may also suffer from low liquidity, making it more difficult for the Fund to enter into its positions each morning at desired prices. The bid-ask spreads on 0DTE options can be wider than with traditional options, increasing the Fund's transaction costs and negatively affecting its returns. Additionally, the proliferation of 0DTE options is relatively new and may therefore be subject to rule changes and operational frictions. To the extent that the OCC enacts new rules relating to 0DTE options that make it impractical or impossible for the Fund to utilize 0DTE options to effectuate its investment strategy, it may instead utilize options with the shortest remaining maturity available or it may utilize swap agreements to provide the desired exposure.

New Fund Risk. The fund is new and has a limited operating history.

Derivatives Risk. The use of derivative instruments (i.e. options contracts) involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments.

Distribution Tax Risk. The Fund currently expects to make distributions on a weekly basis. These distributions may exceed the Fund's income and gains for the Fund's taxable year. Distributions in excess of the Fund's current and accumulated earnings and profits will be treated as a return of capital.

Small Cap Index Risks. The Fund will have significant exposure to the Small Cap Index through its investments in options that utilize the Small Cap Index as the reference asset.

Small Capitalization Companies Risk. Small and/or mid capitalization companies may be more vulnerable to adverse general market or economic developments, and their securities may be less liquid and may experience greater price volatility than larger, more established companies as a result of several factors, including limited trading volumes, fewer products or financial resources, management inexperience and less publicly available information. Accordingly, such companies are generally subject to greater market risk than larger, more established companies.

Roundhill Financial Inc. serves as the investment advisor. The Funds are distributed by Foreside Fund Services, LLC which is not affiliated with Roundhill Financial Inc., U.S. Bank, or any of their affiliates.

Glossary

Options: An option is a contract sold by one party to another that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a stock at an agreed upon price within a certain period or on a specific date.

Covered Call Strategy: A covered call strategy involves writing (selling) covered call options in return for the receipt of premiums. The seller of the option gives up the opportunity to benefit from price increases in the underlying instrument above the exercise price of the options, but continues to bear the risk of underlying instrument price declines.

Out-of-the-Money Options: Out-of-the-money options are options whose strike price is above the market price of the underlying asset.

0DTE Options: 0DTE (zero days to expiration) are options that are set to expire at the end of the trading day on which they are written.

Strike: Price at which the option holder may buy or sell the underlying security, as defined in the terms of the option contract.

Small Cap Index: The Small Cap Index is a measure of the performance of the small-capitalization sector of the U.S. equity market, as defined by FTSE Russell. The Small Cap Index is a subset of the Russell 3000® Index (the "Broad Market Index"), which measures the performance of the broad U.S. equity market, as defined by FTSE Russell. The Small Cap Index is a float-adjusted capitalization-weighted index of equity securities issued by the smallest issuers in the Broad Market Index.

SOURCE Roundhill Investments