New ETF Offers a Tempting Deal: Upside Potential Without the Downside Risk

New ETF Offers a Tempting Deal: Upside Potential Without the Downside Risk

We all have it: the fear of losing money in the markets, which can be a powerful deterrent to getting started. Many people want to participate in the potential gains of the stock market but are hesitant to put their capital at risk. Calamos Investments, an investment firm known for its innovative strategies, has launched a new series of Exchange-Traded Funds (ETFs) that aim to provide investors with an enticing proposition: exposure to the upside of the market without the risk of losing money.

These Structured Protection ETFs are designed to track major market indices like the S&P 500, Nasdaq-100, or Russell 2000 over a one-year outcome period. The twist? If the underlying index goes down during that period, investors won’t lose a dime. It’s like having your cake and eating it too, with a side of peace of mind.

Of course, there’s no such thing as a free lunch in the world of finance. To provide this downside protection, Calamos has to cap the potential upside. Investors will participate in the market’s gains up to a predetermined point, but anything beyond that is off the table. It’s a trade-off: you give up some of the potential rewards in exchange for a safety net.

Under the hood, these ETFs use a combination of options strategies to create a buffer against losses. It’s complex stuff, but the gist is that Calamos is using financial engineering to construct a product that behaves differently than a traditional index fund. They’re essentially shifting some of the risk from the investor to the fund itself.

Now, you might be thinking, “This sounds too good to be true.” And you’d be right to be skeptical. While the downside protection is appealing, it’s important to remember that you’re paying for it in the form of capped upside. That being said, the upside for the new S&P 500-linked ETF is 9.2% to 9.6%, which is not bad actually.

So, if you buy the ETF on day one, you are guaranteed not to lose your initial principal, and if the S&P 500 performs well over the one-year period, you can make up to 9.2%.

For some investors, this trade-off might be worth it. If you can’t afford to stomach a major market downturn, the idea of a guaranteed floor on your losses could help you sleep at night. Or, if you’re sitting on a pile of cash and looking to dip your toes into the market, these ETFs could provide a way to do so with a bit less trepidation.

If you’re considering investing in one of these Structured Protection ETFs, you can find them here at BBAE, inside our BBAE Discover. BBAE Discover provides curated portfolios of sector-specific stocks and ETFs, and we will be sure to provide one for these Structured Protection ETFs. So come to BBAE and check it out.

At the end of the day, these ETFs are a bit like a game of financial “heads I win, tails I don’t lose quite as much.” They’re not a magic bullet, but they do offer a unique value proposition in a world where the market’s ups and downs can feel like a roller coaster ride. Just remember, as with any investment, it’s important to do your due diligence, understand the risks and limitations, and not put all your eggs in one basket (or one ETF, as the case may be).

So, if you’re looking for a way to invest in the market with a bit of a safety harness, BBAE and Calamos’ Structured Protection ETFs might be worth a look.

Happy Investing,

Barry Freeman


BBAE Investing Reimagined

This article is for informational purposes only and is neither investment advice nor a solicitation to buy or sell securities. All investment involves inherent risks, including the total loss of principal, and past performance is not a guarantee of future results. Always conduct thorough research or consult with a financial expert before making any investment decisions. Neither the author nor BBAE has a position in any investment mentioned.

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