It’s no secret that the U.S. equity market seems to be in a far better position than it was earlier this year.
While inflation worries and tariff tensions haven’t gone away entirely, they certainly appear to have eased off a bit. Meanwhile, many companies continue to defy analyst expectations by posting positive results in their quarterly reports and major equity markets near all-time highs.
This creates an interesting junction for equity investors. There’s clearly still some room for the equity market to grow, but the risk factors that led to the sell-off earlier this year haven’t exactly disappeared either.
As such, one way to tackle the current equity market may be through an alternative strategy. Some alternative strategies can provide returns tied to equity performance, designed to generate high monthly income with some downside protection.
Applying Autocallables as an Equity Solution
One alternative strategy that could stand out from the crowd is the Calamos Autocallable Income ETF (CAIE). The fund provides an outside-the-box solution seeking to generate high, stable monthly income through the equity market.
The secret to CAIE’s strategy lies through how the fund employs its portfolio of laddered autocallables. Autocallables are designed to generate coupons like high-yield bonds. They are often linked to major indexes like the S&P 500.
These autocallables may sound complicated, but they’re actually simple. For instance, the autocallables within CAIE’s portfolio all use the S&P 500 as their index. If the S&P 500 rises or stays flat, CAIE investors may earn monthly income until the note gets called. When that happens, the principal gets returned.
Better yet, autocallables actually still can work well during periods of market decline. CAIE’s autocallables have a barrier level of -40%. As long as the S&P 500 doesn’t drop below -40%, investors will receive that monthly income, either until the autocallable reaches maturity or if the note gets called early.
This gives CAIE an edge as a tool for riding today’s equity market. Even if things remain good for now, investors can still rely on the fund to generate resilient monthly income. Meanwhile, if the S&P 500 sees a downturn up to 40%, investors still receive monthly income until maturity plus their principal. We believe this helps CAIE become a “best of both worlds” solution for navigating long-term equity market uncertainty.
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Disclosure Information
Before investing, carefully consider the fund’s investment objectives, risks, charges and expenses. Please see the prospectus and summary prospectus containing this and other information which can be obtained by calling 1-866-363-9219. Read it carefully before investing.
An investment in the Fund(s) is subject to risks, and you could lose money on your investment in the Fund(s). There can be no assurance that the Fund(s) will achieve its investment objective. Your investment in the Fund(s) is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. The risks associated with an investment in the Fund(s) can increase during times of significant market volatility. The Fund(s) also has specific principal risks, which are described below. More detailed information regarding these risks can be found in the Fund’s prospectus.
The principal risks of investing in the Calamos Autocallable Income ETF include: autocallable structure risk, contingent income risk, early redemption risk, barrier risk, authorized participant concentration risk, calculation methodology risk, cash holdings risk, correlation risk, costs of buying and selling fund shares, counterparty risk, credit risk, derivatives risk, equity securities risk, index risk, interest rate risk, investment in a subsidiary, laddered portfolio risk, liquidity risk, market maker risk, market risk, new fund risk, non-diversification risk, premium-discount risk, secondary market trading risk, swap agreement risk, tax risk, trading issues risk, valuation risk, and volatility target index risk.
Autocallable Structure Risk –The Fund’s returns are correlated to the performance of a synthetic portfolio of autocallable notes tracked by the Laddered Autocall Index.
Unmanaged index returns, unlike fund returns, do not reflect fees, expenses or sales charges. Investors cannot invest directly in an index. Total return assumes the reinvestment of income. Current performance may be higher or lower than the performance data shown. Yields represented by trailing 12 month yield for: US Equity- S&P 500; U.S High Yield – Bloomberg US Aggregate Corporate High Yield Index; US 10-year – 10-year US Treasury yield; Equity Premium Income: Cboe S&P 500® 2% OTM BuyWrite Index; Autocallable Income: MerQube US Large Cap Vol Advantage Autocallable Index. MerQube US Large Cap Vol Advantage Autocallable Index is not a proxy for Calamos Autocallable Income ETF (CAIE). The results of the MerQube index will differ to those of CAIE. Investors should consider the risks of investing in CAIE and review the prospectus prior to investing. Performance data quoted represents past performance, which is no guarantee of future results. Current performance may be lower or higher than the performance quoted. The principal value of an investment will fluctuate so that your shares, when sold, may be worth more or less than their original cost.
Autocallable notes have specific structural features that may be unfamiliar to many investors:
–Contingent Income Risk: Coupon payments from the Autocalls are not guaranteed and will not be made if the Underlying Index falls below the Coupon Barrier on observation dates. This means the Fund may generate significantly less income than anticipated during market downturns.
–Early Redemption Risk: Autocalls in the Portfolio may be called before their scheduled maturity if the Underlying Reference Index reaches or exceeds the Autocall Barrier on observation dates. This automatic early redemption could force reinvestment of that portion of the portfolio at lower rates if market yields have declined.
–Barrier Risk: If the Underlying Reference Index falls below the Protection Level Barrier at the maturity of an Autocall in the Portfolio, that portion of the Portfolio will be fully exposed to the negative performance of the Underlying Reference Index from its initial level. This conditional protection creates a binary outcome that can result in sudden, significant losses if barriers are breached.
Weighted Average Coupon: The weighted average coupon of all autocallables as of last operation date
Total return assumes the reinvestment of income. Current performance may be higher or lower than the performance data shown. Yield represented by trailing 12 month yield for: Autocallable Income: MerQube US Large Cap Vol Advantage Autocallable Index. MerQube US Large Cap Vol Advantage Autocallable Index is not a proxy for Calamos Autocallable Income ETF (CAIE). The results of the MerQube index will differ to those of CAIE.
