New Stock ETFs Offering ‘100%’ Downside Protection Are Coming

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Calamos Investments,Downside Protection,Options Market

(Bloomberg) -- It sounds like a surefire, slam-dunk trade for stock investors playing defense: ETFs that will bet on equity markets without — the pitch says ...

-- It sounds like a surefire, slam-dunk trade for stock investors playing defense: ETFs that will bet on equity markets without — the pitch says — going down.Calamos Investments filed Monday for so-called “structured-protection” exchange-traded funds that will track a portion of the returns of the S&P 500, Nasdaq 100 and Russell 2000 while hedging 100% of the downside via the options market, according to a Monday filing.

“With risk-free rates north of 5% today, options-based product issuers are able to deliver meaningful upside participation with 100% capital protection,” said Matt Kaufman, head of ETFs at Calamos. “For those issuing ‘protective’ products, the cost of hedging by selling an option — or series of options — to offset the premium to buy a protective put becomes cheaper as rates rise.

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