In October, U.S. equities were put through the wringer as deep declines were experienced by most sectors, especially technology, as sell-offs ensued and volatility ruled the capital markets. It’s a reminder to investors that even in the midst of a seemingly unstoppable bull market, protecting the downside is necessary–enter the Amplify BlackSwan Growth & Treasury Core ETF (NYSE Arca: SWAN).
Today, Amplify ETFs announced the launch of SWAN, an index-based ETF that 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.
“Investors are increasingly looking for rules-based equity strategies that can adapt to various equity market conditions,” said Christian Magoon, CEO of Amplify ETFs. “We believe SWAN offers investors the ability to participate in S&P 500-like returns over a market cycle, while systematically limiting equity market downside.”
To protect against heavy volatile market swings like those seen in October, 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.