Content and data provided by various third parties and Fidelity − Terms of Use | Help/Glossary
Research > ETFs > ETF / ETP Commentary > 

Why Active Management is Key for Options-Based ETFs

BY | ETF Database
8:38 am ET 07/09/25 | 10 VIEWS
Investing in options-based ETFs can be a powerful way to pursue capital appreciation while aiming for reduced volatility and protection against market downturns. However, the unique nature of options may make active management particularly beneficial due to options having a finite lifespan and sensitivity to market movements. The Fidelity Hedged Equity ETF (FHEQ ) serves as a prime example of this principle in action. FHEQ is actively managed. Fidelity designed FHEQ to offer investors both growth potential and a meaningful reduction in market volatility and exposure to drawdowns. It achieves this through two main components: an equity allocation and a diversified allocation of exchange-traded S&P 500 Index put options.How Active Management Can Add an Edge to Options-Based ETFsA core differentiator for FHEQ is its frequent rebalancing of the put allocation. The active ETF may rebalance put options as frequently as multiple times a week. This frequent rebalancing, made possible by the fund’s active management, helps it maintain its defensive positioning as market conditions change. According to its design, the fund becomes more defensive as the market declines become greater. This means that when volatility spikes and market drawdowns deepen, FHEQ’s hedge grows more robust. It may seek to achieve this goal by holding more puts than its peers in the hedged equity space. This leads to another important aspect of active management in options-based strategies, which lies in the ability to manage entry and exit points for investors. Options are not buy-and-hold investments. They must be continuously rolled and maintained. This ongoing process of adjustment is essential for providing a consistent risk experience for all investors. That’s regardless of when they buy or sell shares.  Unlike options-based ETFs that might only rebalance options quarterly or less frequently, FHEQ’s frequent adjustments aim to minimize timing risk for shareholders. This means that an investor entering or exiting the fund today can expect a risk experience very similar to someone who invested days, weeks, or even a month prior. Ultimately, active management in options-based ETFs like FHEQ has the potential to maximize the effectiveness of the hedge. Additionally, it can potentially provide a more consistent and defensive equity experience for investors. For more news, information, and analysis, visit the ETF Investing Content Hub. Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles. 1212585.1.0

More Commentary

Number of Big Bitcoin Wallets on the Rise
BY | ETF Database
5:16 am ET 07/09/25 | 17 VIEWS
More Dog Days of Summer for the U.S. Dollar
BY | ETF Database
07/08/2025 | 83 VIEWS
Number of Big Bitcoin Wallets on the Rise
BY | ETF Database
07/08/2025 | 136 VIEWS
View more Commentary

Search Commentary

Enter Keyword(s)
Filter Results

Performance data shown is past performance and is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Yield and return will vary, therefore you have a gain or loss when you sell your shares. For standard quarterly performance, go to the fund's Snapshot page by clicking on the ETF/ETP's symbol.

ETFs may trade at a premium or discount to their NAV and are subject to the market fluctuations of their underlying investments.

For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain FBS platforms and investment programs. Please note, this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral. Additional information about the sources, amounts, and terms of compensation can be found in the ETF's prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice. BlackRock and iShares are registered trademarks of BlackRock, Inc. and its affiliates.

FBS receives compensation from the fund's advisor or its affiliates in connection with a marketing program that includes the promotion of this security and other ETFs to customers ("Marketing Program"). The Marketing Program creates incentives for FBS to encourage the purchase of certain ETFs. Additional information about the sources, amounts, and terms of compensation is in the ETF's prospectus and related documents. Please note that this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral.

News, commentary (including "Related Symbols") and events are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.

Any data, charts and other information provided on this page are intended to help self-directed investors evaluate exchange traded products (ETPs), including, but limited to exchange traded funds (ETFs) and exchange traded notes (ETNs). Criteria and inputs entered, including the choice to make ETP comparisons, are at the sole discretion of the user and are solely for the convenience of the user. Analyst opinions, ratings and reports are provided by third-parties unaffiliated with Fidelity. All information supplied or obtained from this page is for informational purposes only and should not be considered investment advice or guidance, an offer of or a solicitation of an offer to buy or sell a particular security, or a recommendation or endorsement by Fidelity of any security or investment strategy. Fidelity does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating ETPs. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use. Determine which securities are right for you based on your investment objectives, risk tolerance, financial situation and other individual factors and re-evaluate them on a periodic basis.

Before investing in any exchange traded product, you should consider its investment objective, risks, charges and expenses. Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully.