AAII Cleveland Ohio Chapter

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? 

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....

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? 

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....

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? 

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....

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?