This ETF Has Zero Downside, Literally
HTML-код
- Опубликовано: 10 сен 2024
- The Calamos S&P 500 Structured Alt Protection ETF (NYSE: $CPSM) launched in May 2024, giving 100% downside protection to investors buying at the fund's inception -- in exchange for no dividend and a capped upside (capped at 9.3% after fees, also at inception; caps are fixed via options contracts at inception so investors buying at later prices receive different levels of upside caps and downside protection).
Are no-downside ETFs too good to be true? BBAE CIO James Early digs into the subject with Calamos’ Head of ETFs Mark Kaufman. They talk about Calamos' latest S&P 500 no-downside ETF, and forthcoming suite of others (NASDAQ 100 is next), and a range of topics including:
1) How Calamos uses options to structure these ETFs
2) How the 100% downside protection works with no credit risk
3) What differentiates Calamos’ zero-downside products from competitors'
4) What happens after the one-year term is up
5) What type of investors no-downside ETFs are for
Do your own homework in deciding what investments are right for you, as always.
More from Matt Kaufman and Calamos at: calamos.com
More from BBAE at: bbae.com
My life changed too when I started doing this and putting money in stocks. The first few years it as really great, but this year I haven't felt like my portfolio is doing well. I have lost more than $40,000 from my portfolio the past four months, and it's now very worrisome.
The year has been really rough for everybody. But I've been able to cushion the effect though. Have you thought of using an investment advisor? They can make you good money especially during uncertain times like this.
Yes, I agree. I use a financial advisor too. Same person since 2020. I don't worry about whether the economy is going up or down or sideways. I always ride through.
Oh, really? I have never thought of that as an option. Can I ask who it is you've been working with? I bet I could use some help myself.
My CFA NICOLE ANASTASIA PLUMLEE a renowned figure in her line of work. I recommend researching her credentials further... She has many years of experience and is a valuable resource for anyone looking to navigate the financial market..
Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.
Hi,
If I sell the buffer ETF before the end of the maturity, what implication will it have to my downside protection and upside potential?
In other words, do I need to hold on to it for the full period?
Great Video
If I understand this correctly this is how the fund works. Please correct me if I am wrong.
1. As of today 27 july 2024, the fund value is where it started. So it wont matter if I go ahead and invest on monday.
2. The fund captures 9% upside of Nasdaq 100 QQQ and then would just sit there. Wouldn’t it be a good idea to withdraw from ETF as soon as 10% cap is hit as we know for sure the ETF has no upside beyond that?
3. Lets say QQQ grew 25% this year and that means this ETF grows at 10%. But in the same period of JUNE 2024-June 2025, NASDAQ QQQ fell by 40% from top so would that mean, in June 2025 the fund return will be zero?
4. Lets say this ETF started JUNE 2024 with value of $24. And in june 2025 the fund value became $24 + $2.4(assuming max cap of 10%) = $26.4. So in June 2024, when the fund gets rolled over, the new protection begins from $26.4?
Please reply and correct my understanding
It wouldn’t just sit up 9%. The variables involved in option pricing show exponential decay so it would accelerate towards 10% if it’s still above the max price the closer it gets to expiration without ever getting there until expiration. You aren’t going to get much return at all unless you hold it for the full year and if it moves in your favor.
Are Flex options available to retail? also with these ETF when and how you purchase? directly with issuer or on exchange? Also when the ETF purchases the options are they exposing themselves to counter party risk
They are, but you have to be a big multi-million-dollar buyer. There's a Flex Mini or Flex Micro (I forgot the name) that aims to be more accessible. Should be no counterparty risk, really, aside from the OCC itself.
How does the ETF handle inflows and outflows? This can get complicated real fast.
Unless you're buying it at issue, I assume you're buying or selling from someone else in the open market. Do you mean creation units?
so max risks is 0.69%
If you buy on day one, yes. The contracts are set for day-one pricing, so as market prices move, the relative upside cap and downside protection wiggle a bit, and you can check the current thresholds on the website. After day one, it may like "close to 100% downside protection" -- you might have a few % of downside, for example.
@@jamese3584 It is hard to work out what would be rate of change of this ETF with respect to the SPY ETF
So a collar strategy?
That's basically the core of it
@@jamese3584 Since these are not main exchange traded options some OTC options , question is at what rate the ETF moves with respect to underlying is it 1 to 1? If SPY goes up 5% is the ETF expected to be up 5% ( before expiry) or if SPY goes down by 5% is ETF supposed to stay at the inception value of $25?
So what happens when inflation goes up to 25% and the equities go up to 20% to try to keep up and you only get 9.8
Bingo. That’s why it’s not free lunch. It’s merely a way to park money in hopes of a strong bull market, while suffering the consequences of a risk-off strategy.
your etfs have zero volume..
Can you explain this CPSM in PLAIN ENGLISH without any WALSTREET JARGONS?.......If I invest $1000 for 1 year what do I get at the end of 1 year?.................
It depends on what the S&P 500 does. If you bought on day one, you basically wouldn't lose money (you'd pay the expense ratio, of course, but no capital loss), and would share in the S&P 500's upside up to 9.3% (or some similar number). So if the S&P 500 went up by 12%, your position would just go up by 9.3%. But if the S&P dropped 12%, you would have no capital loss. Again, these are "day one" numbers... market prices change these, and the company updates its website with the exact downside protection and upside cap pretty frequently.
The most jargon-free way to explain it is that, 0.69% management fee aside, you won't lose money (or if you buy after day one, you might lose some, depending on prices, but usually it's relatively little) if the market declines, but if the market really rages, your upside is capped, too. You're agreeing to "trade" upside above 9.something % in exchange for downside protection, basically.
@@jamese3584 Because the options they use are OTC it is hard to see the rate of change with SPY ( The options on SPY not SPX) By the way how do they get European style options on SPY? the exchange listed options on SPY are American style
You get a max increase of 8% and you won't lose any of your money. Except for the fees you pay them to run the ETF.
@@unitedstateser243 Yes true but what is not clear is what is the rate of change within the 365 period