Last week was a historic one for markets, and many advisors are actively fielding calls from their clients, looking for guidance.
In the upcoming webcast, Special Event: Responding to Uncertainty, Christian Magoon, Founder and CEO, Amplify ETFs; and Graham Day, Vice President of Product and Research, Innovator ETFs, will discuss how various hedging and risk management strategies have performed so far this year, and how advisors should be thinking about positioning for the coming year.
For example, the Amplify BlackSwan Growth & Treasury Core ETF (SWAN) only declined 1.2% over the past week and was up 2.7% year-to-date, compared to the S&P 500’s 4.1% 1-week drop and 4.0% decline so far this year.
The Amplify BlackSwan Growth & Treasury Core ETF seeks uncapped exposure to the S&P 500, while buffering against the possibility of significant losses. Approximately 90% of SWAN will be invested in U.S. Treasury securities, while approximately 10% will be invested in S&P 500 LEAP Options in the form of in-the-money calls. SWAN seeks investment results that generally correspond to the S-Network BlackSwan Core Total Return Index.
To protect against heavy volatile market swings, SWAN will primarily invest in historically low-volatility U.S. Treasuries ranging from two- to 30-year durations, which cumulatively match the initial duration of the 10-year note. The remaining assets will be utilized to purchase “in-the-money” calls, with a strike price below the current price on the S&P 500. SWAN capitalizes on the frequently negative correlation between Treasury bonds and U.S. stocks during periods of market volatility, creating a portfolio that offers exposure to equity returns with a downside buffer in one ETF.
Additionally, Innovator ETFs has come out with a suite of Defined Outcome ETF strategies with a built-in buffer to help investors hedge against risks ahead, depending on one’s level of risk aversion.
For example, the January series includes the Innovator S&P 500 Buffer ETF (BJAN), Innovator S&P 500 Power Buffer ETF (PJAN) and Innovator S&P 500 Ultra Buffer ETF (UJAN), which have a 9%, 15% and 30% buffer, respectively. The Defined Outcome ETF suite also includes the other months of the year to provide a full annual coverage, depending on an investor’s preferred outcome period.
The quarterly series of Defined Outcome ETFs are designed to provide investors an opportunity to purchase shares as close to the beginning of their respective Outcome Periods as possible. Investors can also purchase shares of a previously listed Defined Outcome ETF throughout the entire Outcome Period and obtain a current set of defined outcome parameters.
Investors may look to Innovator’s buffer strategies to mitigate risks and still maintain upside potential. The Defined Outcome ETFs provide market exposure with a built-in downside buffer. The ETFs start with a synthetic 1 to 1 exposure to the target market. They would then include a put spread to provide targeted buffers of 9%, 15% or 30% to their respective targets. Lastly, the upside is capped by selling an upside call to finance downside buffers.
Financial advisors who are interested in learning more about alternative investment strategies can register for the Wednesday, March 4 webcast here.