WisdomTree CBOE S&P 500 PutWrite Strategy Fund (PUTW) and CBOE S&P 500 PutWrite Index (PUT)

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1 Q WisdomTree CBOE S&P 500 PutWrite Strategy Fund (PUTW) and CBOE S&P 500 PutWrite (PUT) WisdomTree.com

2 WisdomTree CBOE S&P 500 PutWrite Strategy Fund +Investment Objective: The WisdomTree CBOE S&P 500 PutWrite Strategy Fund (PUTW) seeks investment results that, before fees and expenses, generally correspond to the performance of the CBOE S&P 500 PutWrite (PUT). +Investment Strategy: PUTW invests in one and three month treasury bills, and sells or writes S&P 500 put options. The number of put options sold is chosen to ensure full collateralization, meaning the total value of the treasury account must be equal to the maximum possible loss from the final settlement of the put options at expiration. In addition: Options written at the money, in order to provide sufficient liquidity Options are written monthly, instead of quarterly or longer, to capture more gross premium The Fund uses European style options, so they can only be exercised at maturity The Fund has net expense ratio of 0.38% Sophisticated Institutional Overlay Strategy offered via 40 Act Structure 2

3 CBOE S&P 500 PutWrite (PUT) Methodology + Strategy: The CBOE S&P 500 PutWrite (PUT) tracks the value of a passive investment strategy consisting of S&P 500 (SPX) short put options overlaid on a money market account invested in one and three months Treasury bills (aka the treasury account ). + Option Details: The SPX puts are struck at the money (the current price of the S&P 500) and are sold on a monthly basis, usually on the 3rd Friday of the month. This is called the roll date and it matches the date of S&P 500 option expirations. The options are European style, so they can only be exercised at maturity. + Roll Date Transactions: At each roll date, any settlement loss from the expiring SPX puts is financed by the treasury account and a new batch of at the money SPX puts is sold. The revenue from the sale of puts is invested into the treasury account. + Cash Collateralized (Non-leveraged Nature) of Puts: The number of SPX puts sold is chosen to ensure full cash collateralization of the puts meaning the index has no built in leverage. This means that the total value of the treasury account must be equal to the maximum possible loss from final settlement of the put options at expiration. Source: CBOE 3

4 Why PUT? Complementary to S&P 500 and Potential for Higher Risk Adjusted Returns +Complementary to S&P 500 with Potential for Higher Risk Adjusted Returns +Historically PUT, the index PUTW tracks, had lower risk than the S&P 500 over the period: PUT had over 85% of the return of the S&P 500 at only 75% of the volatility PUT had a higher Sharpe ratio (a measure of risk-adjusted returns) Over 71% of PUT Returns Between 0% to 4% Compared to Only 48% of Returns for S&P 500 +Blending PUT with the S&P 500 Lowered The Hypothetical Portfolio Beta and Reduced Drawdowns. 4

5 PUT : Compelling Risk & Return Characteristics 8.00% Annualized Returns 7.46% 16.00% Annualized Standard Deviation 15.03% Average Annualized Return 4.00% 4.76% 6.38% Average Annualized Return 12.00% 8.00% 4.00% 11.27% 11.40% 0.00% BXM PUT S&P % BXM PUT S&P Beta vs. S&P % 100% Down Capture vs. S&P % Beta Percentage 80% 60% 40% 65.97% 59.56% % 0.00 BXM PUT S&P 500 0% BXM PUT S&P 500 Source: WisdomTree, CBOE, Zephyr StyleAdvisor, 6/30/07-9/30/17. es are unable to be directly invested into and the performance results may differ from actual fund performance. performance is not affected by the fees and charges inherent with investing in options or the underlying securities. Past performance is not indicative of future results. 5

6 PUT Historically Provides a Measure of Downside Protection PUT outperformed 95% of the time when the S&P 500 experienced a daily negative return and 90% of the time during a negative monthly return Negative Return Stream S&P 500 PUT Positive Return Stream S&P 500 PUT Mean Return -0.87% -0.61% 0.79% 0.40% Median Return -0.51% -0.29% 0.51% 0.18% Standard Deviation 1.06% 0.91% 0.94% 0.67% Negative Return Stream S&P 500 PUT Positive Return Stream S&P 500 PUT Mean Return -3.86% -3.06% 3.06% 1.96% Median Return -2.95% -1.92% 2.37% 1.42% Standard Deviation 3.44% 3.64% 2.46% 1.72% Daily Returns - S&P 500 Vs PUT 12% Monthly Returns - S&P 500 Vs PUT 18% 10% Put 8% 6% 4% PUT 12% 6% 2% 0% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% -2% S&P 500 0% -18% -12% -6% 0% 6% 12% 18% S&P 500-4% -6% -6% -8% -10% -12% -12% -18% Source: WisdomTree, CBOE, 6/20/07-9/30/17. es are unable to be directly invested into and the performance results may differ from actual fund performance. performance is not affected by the fees and charges inherent with investing in options or the underlying securities. You cannot invest directly in an index. Past performance is not indicative of future results. 6

7 Over 71% of PUT Returns Between 0% to 4% Compared to Only 48% of Returns for S&P % Histogram of Monthly Returns 40% PUT S&P 500 Return Percentage 30% 20% 10% 0% < -16% -14% to - 16% -12% to - 14% -10% to - 12% -8% to - 10% -6% to -8% -4% to -6% -2% to -4% 0% to -2% 0% to 2% 2% to 4% 4% to 6% 6% to 8% 8% to 10% 10% to 12% > 12% Source: WisdomTree, CBOE, 6/20/07-9/30/17. es are unable to be directly invested into and the performance results may differ from actual fund performance. performance is not affected by the fees and charges inherent with investing in options or the underlying securities. You cannot invest directly in an index. Past performance is not indicative of future results. 7

8 Long Run Blending of PUT & During Crisis: Adding PUT Helps Lower Risk & Enhance Returns Annualized Returns 8.0% 7.5% 7.0% 6.5% 6.0% Put 80% Put 100% Blending PUT With S&P 500 6/30/ /30/2017 Put 20% Put 40% Put 30% Put 60% Put 50% Put 90% Put 70% Put 10% S&P Total Return 100% Annualized Returns -42.0% -44.0% -46.0% -48.0% -50.0% -52.0% -54.0% -56.0% Blending PUT With S&P 500 Peak Of Financial Crisis: 05/19/ /09/2009 Put 100% Put 90% Put 70% Put 80% Put 60% Put 50% Put 40% Put 30% Put 20% -58.0% Put 10% S&P Total Return 100% 5.5% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0% Annualized Risk -60.0% 34.0% 36.0% 38.0% 40.0% 42.0% 44.0% 46.0% 48.0% Annualized Risk Source: WisdomTree, CBOE, 6/30/07-9/30/17. The 5/19/08-3/9/09 period is chosen to capture the maximum drawdown of the S&P 500 during the financial crisis. es are unable to be directly invested into and the performance results may differ from actual fund performance. performance is not affected by the fees and charges inherent with investing in options or the underlying securities. You cannot invest directly in an index. Past performance is not indicative of future results. 8

9 Blending PUT with the S&P 500 Lowered Portfolio Beta 1.10 Beta vs. S&P CBOE S&P 500 S&P % / PutWrite PUT 90% S&P % / PUT 80% S&P % / PUT 70% S&P % / PUT 60% S&P % / PUT 50% S&P % / PUT 40% S&P % / PUT 30% S&P % / PUT 20% S&P % / PUT 10% S&P 500 Source: WisdomTree, CBOE, Zephyr StyleAdvisor, 6/30/07-9/30/17. es are unable to be directly invested into and the performance results may differ from actual fund performance. performance is not affected by the fees and charges inherent with investing in options or the underlying securities. You cannot invest directly in an index. Past performance is not indicative of future results. 9

10 Writing Puts Should Equal Covered Calls From Options Theory But Historically Put-Writing Had More Option Premiums +Employing either a covered call or put-writing strategy should offer a similar payout structure +But, monthly premiums for PUT averaged 2.03% over the period, 0.18% higher than the CBOE S&P 500 BuyWrite (BXM) average of 1.85% Hypothetical Payoff Diagram 9.00% 8.00% Monthly Gross Option Premiums 7.00% 6.00% PUT Premiums Profit/Loss Underlying Price Premium 5.00% 4.00% BXM Premiums 3.00% Strike Price 2.00% 1.00% 0.00% Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Source: WisdomTree, CBOE, 6/20/07-9/30/17. Monthly premiums are calculated based on the option roll date. You cannot invest directly in an index. Past performance is not indicative of future results. 10

11 Option Premiums are a Primary Driver of Returns Gross Premium 8% 7% 6% 5% 4% 3% Monthly Gross Premium Percentage (6/30/07-9/30/17) Percentage 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% Realized vs. Implied Volatility (9/30/07-9/30/17) Realized Volatility Implied Volatility 2% 20.00% 1% 10.00% 0% Jun-07 Oct-08 Mar-10 Jul-11 Dec-12 Apr-14 Aug-15 Jan % Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 $60 $50 Trailing 12 Month Gross Premiums of $100 (5/31/08-9/30/17) $50 $45 $40 $42 Calendar Year Gross Premiums of $100 12/31/07-12/31/16 $39 Gross Premium $40 $30 $20 Gross Premiums $35 $30 $25 $20 $15 $27 $29 $22 $16 $15 $20 $19 $10 $10 $5 $- May-08 Sep-09 Feb-11 Jun-12 Nov-13 Mar-15 Aug-16 $ Source: WisdomTree, CBOE, as of 9/30/17. Monthly premiums are calculated based on the option roll date an assumes a fixed 100 dollar investment at each roll date. Indices are unable to be directly invested into and the performance results may differ from actual fund performance. performance is not affected by the fees and charges inherent with investing in options or the underlying securities. You cannot invest directly in an index. Past performance is not indicative of future results. 11

12 Calendar Year Return Comparison 50% 40% 30% 42% 39% 26% 32% 27% 29% 32% Percentage 20% 10% 0% -10% 15% 9% 6% 2% 22% 16% 8% 20% 19% 16% 15% 12% 14% 12% 6% 6% 8% 1% -20% Gross Premiums -30% -40% -37% -27% S&P 500 PUT -50% Source: WisdomTree, CBOE, 12/31/08-12/31/ calendar year was chosen as start date because it reflects the first full calendar year of data for the PUT since live calculation. es are unable to be directly invested into and the performance results may differ from actual fund performance. performance is not affected by the fees and charges inherent with investing in options or the underlying securities. You cannot invest directly in an index. Past performance is not indicative of future results. 12

13 Fund Mechanics +The Fund sells at the money European style S&P 500 put options on a monthly basis. The Fund writes at the money options to obtain sufficient liquidity The Fund uses European style options, so they can only be exercised at maturity +Between roll dates, if money flows into the fund, the fund will sell additional options in proportion to the flows. If money flows out of the fund, the fund will unwind the existing option positions in proportion to remain fully collateralized. +The Fund will distribute any income on an annual basis. If gains arise from the SPX put written, they are a taxed as 40% short-term and 60% long-term capital gains. If losses arise, they can be carried forward in accordance with Internal Revenue Service rules to potentially offset future gains. Neither WisdomTree Investments, Inc. nor its affiliates, nor Foreside Fund Services, LLC, or its affiliates provide tax advice. All references to tax matters or information provided on this site are for illustrative purposes only and should not be considered tax advice and cannot be used for the purpose of avoiding tax penalties. Investors seeking tax advice should consult an independent tax advisor. 13

14 Definitions + S&P 500 (SPX): Market capitalization-weighted benchmark of 500 stocks selected by the Standard and Poor s Committee designed to represent the performance of the leading industries in the United States economy. + CBOE S&P 500 PutWrite (PUT): index that measures the performance of a hypothetical portfolio that sells S&P 500 (SPX) put options against collateralized cash reserves held in a money market account. The PUT strategy is designed to sell a sequence of one-month, at-the-money, S&P 500 puts and invest cash at one- and three-month Treasury Bill rates. The number of puts sold varies from month to month, but is limited so that the amount held in Treasury Bills can finance the maximum possible loss from final settlement of the SPX puts. + CBOE Volatility (VIX ): measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Since its introduction in 1993, VIX has been considered by many to be the world's premier barometer of investor sentiment and market volatility. + CBOE S&P 500 BuyWrite (BXMSM): The CBOE S&P 500 BuyWrite (BXM) is a benchmark index designed to track the performance of a hypothetical buy-write strategy on the S&P Volatility: A measure of the dispersion of actual returns around a particular average level. + Risk-adjusted returns: Returns measured in relation to their own variability. High returns with a high level of risk indicate a lower probability that actual returns were close to average returns. High returns with a low level of risk would be more desirable, as they indicate a higher probability that actual returns were close to average returns. 14

15 Important Information Investors should carefully consider the investment objectives, risks, charges and expenses of the Funds before investing. To obtain a prospectus containing this and other important information, call WISE (9473) or visit wisdomtree.com. Read the prospectus carefully before you invest. There are risks associated with investing, including possible loss of principal. The Fund will invest in derivatives, including S&P 500 put options ( SPX Puts ). Investments in derivative investments can be volatile, may be less liquid than securities and may be more sensitive to the effect of varied economic conditions. The value of the SPX Puts in which the Fund invests is partly based on the volatility used by market participants to price such options (i.e., implied volatility). The options values are partly based on the volatility used by dealers to price such options, so increases in the implied volatility of such options will cause the value of such options to increase, which will result in a corresponding increase in the liabilities of the Fund and a decrease the Fund s NAV. Options may be subject to volatile swings in price influenced by changes in the value of the underlying instrument. The potential return to the Fund is limited to the amount of option premiums it receives; however, the Fund can potentially lose up to the entire strike price of each option it sells. Due to the investment strategy of the Fund, it may make higher capital gain distributions than other ETFs. Please read the Fund s prospectus for specific details regarding the Fund s risk profile. The CBOE S&P 500PutWrite is a product of S&P Dow Jones Indices LLC or its affiliates ( SPDJI ) and [CBOE], and has been licensed for use by WisdomTree. Standard & Poors and S&P are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademarks Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by WisdomTree. CBOE is a trademark of the Chicago Board Options Exchange, Incorporated, and has been licensed for use by SPDJI and WisdomTree. The WisdomTree CBOE S&P 500 PutWrite Strategy Fund is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, or the Chicago Board Options Exchange, Incorporated and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the CBOE S&P 500 PutWrite. WisdomTree Funds are distributed by Foreside Fund Services, LLC, in the U.S. only. Foreside Fund Services, LLC is not affiliated with the other entities mentioned. WTGM