(Bloomberg) — It sounds like a safe, no-nonsense trade for stock investors playing hedges: ETFs that will bet on stock markets without going down, says Fushe.

Calamos Investments filed Monday for so-called “structured hedge” exchange-traded funds that will track a portion of the returns of the S&P 500, Nasdaq 100 and Russell 2000 while protecting 100% of the downside through options, according to a market filing on Monday.

The first fund released within the suite is the Calamos S&P 500 Structured Alt Protection ETF, which aims to match the price return of the SPDR S&P 500 ETF Trust (ticker SPY) up to a cap of 9.65%.

The catch: Investors looking to reap full protection will have to buy it on launch day — May 1, 2024 — and hold it, rain or shine, until April 30, 2025. After that, a grace period begins. defined coverage cloud.

CPSM, like others in the ETF's upcoming lineup, will primarily invest its assets in derivatives by buying and selling a combination of call and put options to hedge against market volatility, according to the fund's prospectus. A regulatory filing notes that there is no guarantee that the fund will be successful in providing much-needed downside protection.

“With risk-free rates north of 5% today, issuers of options-based products are able to provide significant positive participation with 100% capital protection,” said Matt Kaufman, head of ETFs at Calamos. “For those issuing 'hedging' products, the cost of hedging by selling an option – or a series of options – to offset the premium to buy a hedging device becomes cheaper as rates rise.”

Assessment of appetite

Issuers are testing demand for funds that offer equity exposure and downside protection as investors grapple with the volatility of high rates. The Innovative Capital Defined Protection ETF (TJUL), which provides 100% downside protection over a two-year performance period, has grown to $230 million since inception in July. BlackRock, the world's largest issuer of ETFs, has too deposited for the funds they say they offer full downside protection.

100% equity-protected funds offer investors an extra layer of protection than so-called “buffer ETFs,” which first hit the market in 2018. These funds offer downside risk protection at a certain buffer level, say 10 First % of losses. But after this level, investors are still exposed to losses.

These new funds from Calamos will generally offer less upside exposure, but also offer more downside protection.

“For people as they age, approaching retirement – ​​they can't afford significant market pullbacks, but they also can't afford not to be in the market. So this gives them an opportunity,” Kaufman said.

CPSM is expected to start on May 1. Calamos plans to issue new funds every few months.

The investment firm, with approximately $37 billion in assets under management, specializes in option-based strategies in various fund envelopes, including ETFs, separately managed portfolios and mutual funds.