Is investing in ETFs that actually invest using options a good idea?

Oldman answered one year ago …

In theory, the yields from call options (future sales price supposed to go up) based upon quality securities, has been a way to generate relatively safe increments from the premiums paid by the buyer of the calls...to the seller (in this case, the ETF component securities manager). This assumes a flat or sideways trading market...when the market goes up significantly, the securities get called away, at the espiration (strike price of the call) to the "buyer". However, in a down trending market, the calls may expire and the underlying issues depreciate in price and are less valuable as a basis for rolling over to new "calls". This can be offset by selling "put", but in a down-trending market, unless the seller can get some buyer...at the lower price... the "puts' don't generate a lot of income to offset the declining value of the stocks.

So enhanced returns using these techniques are possible in a slow, evenly moving and gradually increasing market...which hasn't been the case, recently (See VIX - a measure of volatility) where stocks may have a +/- 15% valuation change within a single session, and get "called' at midday, before puts expire at a down close...etc.

For a list of option-enhanced ETFs and Closed_end Funds, which also use this technique; and for general selection criteria, I recommend

http://seekingalpha.com/etf

and go to the section about the "editors'" lists of ETFs.