My investment strategies and newsletter recommendations focus on income stocks and funds. Being able to count on the predictable nature of dividends is far better to trying to guess the direction of stock prices and counting on capital gains, which may or may not show up when needed.

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I also like commodities because they are the building blocks of everything and provide diversification away from the stock market. Dividend-paying, commodity-focused investments quickly get my attention.

For a while now, I’ve been recommending the ETRACS Crude Oil Shares Covered Call ETN (USOI) to my subscribers. USOI, which tracks the price and dividends of a covered call strategy employed for the United States Oil Fund, LP ETF (USO), has proven to be a successful investment. Strikes for the short calls are chosen at 6% out of the money. Despite its complexity, it has performed admirably.

Recently, Defiance ETFs launched a USO-tracking, dividend-paying ETF called the Defiance Oil Enhanced Options Income ETF (USOY). This fund uses a very different options strategy.

The USOI portfolio will consist primarily of Treasury securities. Exposure to USO will come from selling at-the-money or in-the-money puts on USO. Fund managers will trade weekly FLEX options, which allow for customized terms.

At-the-money puts will primarily generate cash income but can result in losses if USO is below the strike price at expiration. The in-the-money put values will reflect any changes in crude oil prices as tracked by USO.

The Defiance ETFs operate several funds using short (selling) put strategies. The earliest funds launched last Fall. Results for individual funds have been mixed, with a couple of solid winners and some serious disappointments.

USOY is set to make its mark with its first monthly dividend on July 5. I’m eagerly awaiting the initial yield and will be closely monitoring this fund.

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