If you’re an EU resident looking to invest in US-domiciled ETFs, you may have run into some roadblocks. Since 2018, EU regulations have made it difficult for retail investors to access US-registered ETFs, primarily due to non-compliance with the Undertakings for Collective Investment in Transferable Securities (UCITS) directive. This rule requires that ETFs be authorized by the EU before they can be marketed to European retail investors.

As a result, many popular US-domiciled funds, such as SPY, VOO, QQQ, IWM, JEPI, JEPQ, and others, may be unavailable through your usual broker. The frustration is understandable, especially for investors looking to diversify with US-based assets. While some European-domiciled ETFs attempt to mirror their US counterparts, they often come with higher management fees and a more limited selection of investment options, which can eat into your long-term returns and reduce diversification opportunities.

But there’s good news. Despite what you may have heard, it’s not illegal for EU retail investors to acquire US ETFs. The restrictions mainly apply to brokerages, preventing them from marketing these products to retail investors who don’t meet certain criteria. There are ways to access these ETFs if you’re willing to explore some alternatives. One option is to open a brokerage account using a non-EU address, or you could seek “elective professional client” status, which opens up access to a wider range of investment products, including US ETFs.

While these methods might take some extra work, there’s another interesting approach: using options. Unlike direct ETF investments, options trading on US ETFs is not restricted by the UCITS directive. European brokers can legally offer options on US ETFs, giving you indirect access to these funds.

One strategy I frequently use is selling in-the-money put options on US ETFs. Here’s how it works: by selling a cash-secured ITM put option shortly before expiration, you can acquire the underlying ETF at a discount, while also earning a premium. Options contracts typically involve 100 shares, so you need to ensure you have enough cash to cover this, but it’s a clever way to circumvent some of the restrictions while potentially lowering your cost basis.

To help you understand how this strategy works, let’s say you want to buy shares of SPY (SPDR S&P 500 ETF) that’s currently trading at $400 per share. You could sell one cash-secured in-the-money put option for $11 with a strike price of $410 that expires in one day. By selling this option, you receive a premium of $1,100 ($11 x 100 shares), and in return, you commit to buying 100 shares of the ETF at a price of $410 per share if the option is exercised. Since the option is in-the-money and expires the next day, there is a high probability of being assigned the shares.

Let’s break it down with an example. Suppose you want to acquire shares of SPY (SPDR S&P 500 ETF), which is trading at $400. You could sell an ITM put option with a strike price of $410 that expires tomorrow for a premium of $11 per share. That’s $1,100 in premium for one contract. By selling this option, you’re committing to buy 100 shares of SPY at $410 if the option is exercised. If SPY is trading below $410 at expiration, you’ll be assigned the shares at that price – but with the $1,100 premium you’ve collected, your effective cost per share drops to $399!

If SPY stays above $410, you simply keep the premium and can repeat the process. It’s a win-win: either you acquire the ETF at a discount, or you pocket the premium and try again. The key here is liquidity. Not all ETFs have a robust options market, so it’s essential to choose ETFs with liquid options to ensure smooth trade execution.

There are a few precautions to keep in mind. Make sure you have enough cash to cover the purchase of 100 shares if the option is exercised. Avoid selling naked options unless you’re comfortable with the risks, as this could expose you to significant losses if the market moves against you.

This isn’t the only options strategy available for gaining exposure to US ETFs. You might also consider buying long-term, deep-in-the-money call options (LEAPs) as a way to leverage your position or selling out-of-the-money put options to generate income. Advanced strategies, like synthetic stock positions, offer even more ways to tailor your portfolio.

In future articles, I’ll delve deeper into these strategies, including the nuances of managing options trades to balance risk and reward. With a bit of creativity and the right approach, you can still build a diverse portfolio even under the EU’s regulatory restrictions.