Credit Suisse, the bank that recently agreed to sell its
European ETF operations to iShares, filed paperwork with regulators
to market a
ETN that will feature long exposure to physical silver coupled with
an overlay of call options-a covered-call strategy that's quite
similar to a covered-call gold ETN the bank launched in
The Credit Suisse Silver Shares Covered Call Exchange Traded
Notes is expected to go live on the Nasdaq board Wednesday, under
the ticker "SLVO," the prospectus said. The ETN, which will come
with an annual fee of 0.65 percent of assets, or $65 for each
$10,000 invested. That's the same price as the Credit Suisse Gold
Shares Covered Call ETN (NasdaqGM:GLDI) that the company launched
three months ago
SLVO will have notional exposure to the silver bullion iShares
Silver Trust ETF (NYSEArca:SLV) while "notionally" selling monthly
"out of the money" SLV call options, according to the paperwork.
The gold-linked ETN "GLDI" also notionally sells out-of-the-money
GLD calls options. It has gathered about $24 million since its
It's hardly clear how precious metals will perform going
forward-particularly with gold dropping 14 percent below $1,400 a
troy ounce in the past three sessions-but doubts are now in
evidence that the rallying prices may be a thing of the past. Yet
it is clear that SLVO and GLDI might be the perfect securities for
investors on the fence about that issue, as it represents a
somewhat neutral view on gold.
Premiums on the notional sale of the call options will be
received monthly, the company said. The silver ETN is designed to
enhance current cash flow through those premiums in exchange for
giving up any gains beyond 6 percent per month. GLDI, the
gold-linked ETN, uses a similar mechanism, but gives up gains
beyond 6 percent per month.
Apart from those premium payments softening the blow of a
sell-off in SLV or GLD, nothing about the two securities is
designed to provide downside protection.
The silver-linked ETNs, which will mature on April 21, 2033, are
subject to early redemption or acceleration "in whole or in part at
any time," according to the prospectus.
They will have an initial "principal amount" of $20 per share,
the same as GLDI.
ETNs are senior unsecured obligations-in this case of Credit
Suisse's Nassau branch. Unlike
, they have no tracking error, but, also unlike ETFs, they
represent a credit risk. For example, if Credit Suisse ever faced
bankruptcy, holders of GLDI would likely lose their entire
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