ProShares Ultrashort FTSE China 50 (FXP) Covered Calls

The ProShares UltraShort FTSE China 50 ETF (FXP) is an exchange-traded fund that seeks daily investment results corresponding to two times the inverse (-2x) of the daily performance of the FTSE China 50 Index. The fund provides bearish exposure to the 50 largest and most liquid Chinese companies listed on the Hong Kong Stock Exchange. It is primarily used by investors for short-term tactical trading, hedging, or profiting from downturns in the Chinese equity market.

You can sell covered calls on ProShares Ultrashort FTSE China 50 to lower risk and earn monthly income. Born To Sell's covered call screener gives you customized search capabilities across all possible covered calls but here are a couple of examples for FXP (prices last updated Thu 4:16 PM ET):

Want to make money with covered calls?  Sign Up For A Free Trial

Core Business and Products

FXP is a leveraged inverse ETF designed to deliver a specific daily investment outcome. It tracks the FTSE China 50 Index, which comprises the 50 largest Chinese "H-Shares" traded in Hong Kong, including major entities in the financial, technology, and energy sectors. Because it is an inverse fund, it is engineered to increase in value when the underlying index declines, and decrease in value when the index rises.

To achieve its -2x daily objective, the fund does not hold the physical shares of the companies in the index. Instead, it utilizes financial derivatives, primarily total return swaps and futures contracts, with major global banking institutions. As a geared fund, it resets its exposure daily. This daily rebalancing means that over periods longer than a single day, the fund’s performance may deviate significantly from a simple two-times inverse return due to the effects of compounding and market volatility.

Competitive Landscape

FXP competes with other exchange-traded products that offer short or leveraged exposure to the Chinese economy. These alternatives vary by their specific leverage factors and the underlying indices they track. Key competitors include:

1. Direxion Daily FTSE China Bear 3X Shares: An aggressive competitor that offers three times (-3x) inverse daily exposure to the same FTSE China 50 Index.
2. iShares MSCI China ETF: A long-only fund that tracks a broader set of Chinese equities and serves as a primary benchmark for the region.
3. SPDR S&P China ETF: A major competitor in the international equity space providing broad exposure to investable Chinese companies.
4. Direxion Daily CSI 300 China A Share Bull 2X: Offers leveraged bullish exposure to China A-shares, representing the opposite market sentiment of FXP.
5. ProShares Short FTSE China 50: A sister fund that offers non-leveraged (-1x) inverse exposure for investors seeking a less volatile bearish position.

Strategic Outlook and Innovation

The strategic utility of FXP is closely tied to global macroeconomic sentiment toward Chinese industrial and financial stability. As one of the more established inverse vehicles for the region, it is frequently used to express a negative view on Chinese large-cap performance or to hedge long-term exposure to emerging markets. The fund’s relevance persists as long as there is high demand for liquid tools to manage the specific risks associated with the world’s second-largest economy.

Innovation within this fund category focuses on improving the efficiency of the underlying swap agreements to reduce the "cost of carry" for the inverse position. Since holding leveraged inverse funds over time can lead to value erosion through beta slippage, the management team focuses on precise daily execution. While the fund’s structure is evergreen, it benefits from ongoing improvements in derivative market liquidity, allowing for tighter tracking of its daily target even during periods of extreme price swings in the Hong Kong market.

Want more examples? FXO Covered Calls | FXR Covered Calls