The WRTH ETF: Options Income Without Owning Stocks

**Nicole** (0:00)
This is our ETF Watchlist Segment. Joining me right now, Carter Braxton Worth, founder and CEO of Worth Charting. And we have the ETF WRTH, Worth Charting Options Income ETF. So tell us a little bit about the strategy of WRTH.

**Carter Braxton Worth** (0:17)
Thanks, Nicole. Sure, so I think what separates this from any existing ETF is that we never own stocks. We're not short, we're not long.
All money is held as collateral against the business of selling strangles. Take a $100 stock. We will sell the out of the money call, always short term in nature, sort of front months, so 15 to 20 sessions or less. For that $100 stock, as an example, sell the 115 calls, take in premium, and sell the 85 puts. And so we're in the decay business. We're waiting for a stock to basically trade in a range. Now, you don't just do it on any stock. You have overlays that increase our odds, which is that we're looking for a stock that's had a fairly prominent directional move.
Several weeks up, 10, 20%, several weeks down. And in the study of sequencing, after something has had a big move, higher or lower, it typically consolidates, rests, backs and fills. Just as an athlete would, or a scholar has spent 20 hours in the library, you need to take a walk around the block. And so in the study of sequencing, after a big directional move, 10, 15, 20%, we get in motion selling short-term out of the money, calls and puts, and waiting for decay. And just one other thing that's important before anything else we might discuss is that everyone knows that there's a tailwind to the endeavor in the sense that, what percentage of all short-term out of the money, calls and puts expire worthless? You can get the data from the exchanges, 75 percent, because they are just that, they're out of the money and they are very short duration left. They're highly speculative, so we sell those to people who want to speculate, or to large portfolios who are using those short-term out of the money calls and puts to buy insurance on their positions.

**Nicole** (2:15)
And you have the strangle positions, actually we talked about memory and software and you have that. You mentioned the IGV.
I also think DRAM is something that you have positions in, right? The SMH, DY. Tell me about maybe a specific example now, what you're looking for going forward. What, I mean, you don't really need it to go one way or the other way, you just need some of that volatility, I guess.

**Carter Braxton Worth** (2:41)
Well, so it's a specific setup we're looking for. It's a two-part sequence. Anything that's ascended and ascended and ascended has been incredible. Think of silver going from 20-an-ounce up eight-fold or the socks index going up four, five, six-fold. That's the first part. Over six, eight, ten months, maybe two years. That then second part of the sequence has a collapse.
After that, both bulls and bears are thinking, this is the time to be even more aggressive. The bull, this has been a great winner for a long time. This setback, this 30, 40% drop, sammys or silver, it's going to bounce from here. They're willing to pay high premiums for out-of-the-money calls. The bear, see, we knew it was going to crack at one point, and here's the crack, and this is just the beginning. It'll go a lot lower. What actually happens is neither of those things typically. If you have that two-part sequence of a great run-up, think of sammys, think of precious metals, think of oil, and then you have an equally important setback, drawdown, collapse, correction.
You become range-bound. So we're looking for a period of high volatility that gives way to less volatility.

**Nicole** (3:54)
Right, and that range-bound is also what you're looking for.

**Carter Braxton Worth** (3:58)
That's right.

**Nicole** (3:59)
That's the sweet spot, I guess we can say, for you, right? And something like DICOM, which is something that you have, DICOM Industries did exactly that. It hit a high early summer only to see it tank, and it's been down 40% in three months. That's what you're looking for, right?

**Carter Braxton Worth** (4:16)
Right, so, exactly, properly so. The bear thinks it's not going to stop at 40, it's going to go down 50, 60, something's wrong, and they're willing to buy out of the money puts, and the bull, this is overdone, it's not going to drop 70%, it's already down 40, I should play it for bounce, willing to buy calls. We sell those out of the money calls and puts. And key, of course, we don't do it on biotech, because you have binary, huge moves up or down, but we don't do it on small cap stocks, and we don't take earnings risks. We don't ever enter in this triangle that between the point at which we enter and the point of expiration, earnings are due. So we eliminate some of the great movers of stocks, and then again, we're in the vol crush business after a period of great volatility up and then down.