Building a Portfolio in the Face of Rising Rates | ETF Trends

Defined outcomes have been available to investors for decades through insurance and bank wrappers, and the Defined Outcome ETF suite has transformed the options investing landscape. In this upcoming webinar, join Innovator ETFs and ETF Trends for a

In the upcoming webcast, Building a Portfolio in the Face of Rising Rates, Bruce Bond, Co-Founder and CEO, Innovator ETFs; and Graham Day, Vice President of Product and Research, Innovator ETFs, will discuss how defined outcome ETFs work and how they can help financial advisors navigate their clients through a rising rate environment.

For example, the Innovator Defined Wealth Shield ETF (BALT) uses options on SPY (SPDR S&P 500 ETF Trust) is seeking to provide exposure to the equity market to a cap while targeting a significant buffer against losses in SPY each calendar quarter.

BALT provides investment returns by allowing investors to participate in the upside of the equity markets with a significant buffer against losses, but it does not provide fixed income typical of bonds. The Innovator Defined Wealth Shield ETF seeks to offer advisors a defensive investment strategy intended as an alternative to cash, short-term debt, and core bond strategies common in traditional portfolio construction and conservative allocations.

The ETF targets a 20% buffer every 3-month outcome period. The ETF can be held indefinitely, resetting at the end of each outcome period. While the ETF targets a 20% buffer, it could range from 15% to 20%. BALT includes synthetic 1:1 exposure to the S&P 500 ETF (SPY), a put spread to provide a buffer targeting 20% and sell on the upside call to finance downside buffers.

Additionally, Innovator ETFs offer 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 full annual coverage, depending on an investor’s preferred outcome period.

The quarterly series of Defined Outcome ETFs are designed to allow investors 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 Defined Outcome ETF strategies can register for the Wednesday, March 30 webcast here.