Today, AllianzIM debuted its second ETF that looks to provide capped upside exposure to the price performance of the SPDR S&P 500 ETF Trust (SPY) and limit downside losses to just 5% within its outcome period via a floor. The AllianzIM U.S. Equity 6 Month Floor5 Apr/Oct ETF (NYSE Arca: FLAO) resets April 1 and October 1 of each year and currently has an upside cap before expenses of 8.43%.
FLAO is a follow up to the AllianzIM U.S. Equity 6 Month Floor5 Jan/Jul ETF (FLJJ), which launched February 1. It currently has $23.5 million in assets under management. Both FLJJ and FLAO have expense ratios of 0.74%.
Like its sister fund, FLAO is actively managed and uses flexible exchange (FLEX) options on SPY to execute its strategy. Buffer ETFs commonly make use of FLEX options to achieve their goals. And although floor strategies are somewhat different, they use the same type of options contracts.
A floor aims to protect the investor from any further losses beyond a specified downside limit. Meanwhile, a buffer looks to protect against a certain amount of losses, but allows for further downside exposure once the limit has been exceeded.
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