AAII Cleveland Ohio Chapter

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  • 1.  Defined Outcome ETF's instead of T-bills and CD's

    Posted 11-05-2024 10:14

    I have seen a number of newer ETFs called Defined Outcome ETFs sold by Calamos and Innovators.  These invest in SPY and they limit your downside risk to 0% but you give up part of the SPY upside gains in exchange.  Leverage is used to protect you on the downside.  The stated market niche is annuity and bank deposits.  For example you purchase the 12 month outcome ETF on December 1 and hold it until November 30 of the next year.  Your downside returns are 0% and your upside cap is limited to 9%.  All done withing the ETF wrapper.  These have been around since 2017 at least.  ZNOV is an example of the November issue from Innovators.  The upside cap is 7.49% on it.  As T-Bills drop in rate this has some appeal.  Can anyone comment on the validity of these products and the safety as compared to cash like options available today.  What sort of catastrophic economic event would cause these to fail? 



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    John R.
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  • 2.  RE: Defined Outcome ETF's instead of T-bills and CD's

    Posted 11-10-2024 15:14

    I remember some products like this before the financial crisis in 2008. In fact I believe another investing newsletter recommended these products.

    They were structured as  I recall by buying T bills with some of the money and Option calls to get upside.

    However, I got burned and they got hit hard during the financial crisis and I lost money. 

    I wasn't sophisticated to understand the instrument completely and couldn't understand how I lost money. However they may have invested in mortgage backed securities or those pooled mortgages instead of government T bills/notes etc.

    This would be a good discussion. I will read more about ZNOV....



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    JOHN PINKOWSKI
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  • 3.  RE: Defined Outcome ETF's instead of T-bills and CD's

    Posted 11-10-2024 15:52

     

    There are several webinars and podcasts   https://podcasts.apple.com/us/podcast/should-you-buy-etfs-with-100-loss-protection/id1349873572?i=1000657705323   This is the one that acquainted me with the product.  It is my understanding these invest in SPY and use leverage in various forms to accomplish the goal of zero downside risk....I am too ignorant to even ask intelligent questions about what could go wrong...

     

    John Robie

     




    Original Message


  • 4.  RE: Defined Outcome ETF's instead of T-bills and CD's

    Posted 11-10-2024 15:53

    There are several webinars and podcasts   https://podcasts.apple.com/us/podcast/should-you-buy-etfs-with-100-loss-protection/id1349873572?i=1000657705323   This is the one that acquainted me with the product.  It is my understanding these invest in SPY and use leverage in various forms to accomplish the goal of zero downside risk....I am too ignorant to even ask intelligent questions about what could go wrong...

     

    John Robie

     

     

     




    Original Message


  • 5.  RE: Defined Outcome ETF's instead of T-bills and CD's

    Posted 11-10-2024 20:17

    Wall Street Journal October 4, 2024.  I don't have access to this article

    Is This ETF Your Knight in Shining Armor?

    'Buffer' funds have become one of Wall Street's hottest products. Make sure you understand the trade-off you're making before you buy.

     

     

    John Robie

     

    Jrobie1188@gmail.com

     




    Original Message