Invesco analyzes income portfolio strategies

The CBOE Volatility Indexalso known as Wall Street’s fear gauge, is heading into the most volatile week since April.

For investors hesitant about the recent wild swings, Invesco senior portfolio manager John Burrello sees income funds using options-based strategies as a sound game plan. His reasoning: They have more structural protection built in.

“Options are not dependent on the stock’s correlation to another… asset class,” Burrello told CNBC.ETF edge” this week. “They may have a more reliable form of downside protection and may also offer income that is not sensitive to interest rates.”

Burrello, who serves as a service technician I investGlobal Asset Allocation Team suggests this should be a benefit for investors due to the cycle of interest rate cuts. Policymakers are expected to cut interest rates by a quarter of a point later this month, in line with the Wall Street consensus.

“Adding revenue without relying on the Fed is becoming increasingly important. I think that’s driving some growth in this area,” he noted.

The funds generated by Invesco include, among others: Invesco QQQ ETF Income Advantage, Invesco S&P 500 Equal-Yield ETF and Invesco MSCI EAFE Income ETF.

So far this year, the Invesco MSCI EAFE Income Advantage ETF is up about 14%, while the company’s QQQ Income Advantage ETF is up about 6%. They have also increased by about two percent over the past week.

Meanwhile, the Invesco S&P 500 Equal Weight Advantage ETF remains virtually unchanged for the year.

Burrello believes the options income space has attracted a lot of new products during this time may pose a challenge for investors to understand the differences.

His advice: Look for options income ETFs managed by institutional options specialists, beware of unsustainable returns with potentially high fees.