Alternative Investments: As Single Stock ETFs Become The Flavor Of The Season, Innovator Launches The Hedged TSLA Strategy ETF (TSLH)
Investors can gain upside participation in Tesla, subject to a limit on investment gains, while aiming to protect against losses of greater than 10%, each calendar quarter.
Innovator Capital Management, which pioneered Defined Outcome ETFs, listed the Innovator Hedged TSLA Strategy ETF (ticker: TSLH) on July 26th, on the Cboe. It is the first ETF to provide long exposure to a single stock, in this case Tesla (NASDAQ: TSLA), with an inbuilt system of risk management and protection against the volatility of the stock. (GlobeNewswire)
Innovator Hedged TSLA Strategy ETF (ticker: TSLH)
TSLH is meant for investors wanting to take a long position in Tesla but without the risk of a significant loss. Investors can therefore get the opportunity to share in the growth potential of the EV maker, yet hedge against an unexpected and sizable loss.
“TSLA has historically exhibited significant upside, but not without substantial risk along the way. TSLH seeks to limit that risk, while enabling participation in the upside,” says the website of the ETF.
The ETF has an Annual Expense Ratio of 0.79%, a downside quarterly floor (loss) of 10%, and an upside quarterly cap (profit) of 9.29%.
Tesla Options Strategy
“The ETF’s strategy will seek to solve for the large historical drawdowns in shares of the electric vehicle leader, offering potentially substantial upside exposure to TSLA during periods when the stock rises while attempting to limit downside risk by targeting a protective floor against TSLA losses greater than approximately 10% per quarter,” Innovator said in a statement.
The ETF will not invest in Tesla, instead it will purchase options on its stock.
“While there is little doubt Teslas are amazingly sleek, smooth-driving vehicles, the very volatile ride in the shares of the electric vehicle (EV) leader leaves a lot to be desired for advisors and their clients who are not accustomed to such a rough road. Yet, the innovation potential that Elon Musk’s company represents is hard to ignore. For those investors with a lower risk tolerance who still desire exposure to the potential capital appreciation of one of the most inventive entrepreneurs and leading disruptors in the global economy today – as well as those longtime shareholders who have seen substantial gains in TSLA and would like to take some gains yet still have upside exposure, or who wish to put new money to work but in a risk-managed fashion – we’re excited to bring this investment strategy to market. In fact, TSLH will list as the first ETF ever to provide long exposure to a single-stock with built-in risk management,” said Bruce Bond, CEO of Innovator ETFs.
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