Liquid Alternatives: Innovator’s Defined Outcome ETFs – Prepare For Market Volatility

March 19, 2020 | Liquid Alternatives
https://dailyalts.com/wp-content/uploads/2020/03/seat-belt-4227630_640-innovator-defined-outcome.jpg

Innovator’s defined outcome ETFs are tools for diversification and management of market risk.

Investors have plowed in $3.2 trillion into hedge funds and $1 trillion into equity-linked structured products, investments that have limited downside protection, according to Bruce Bond, Co-Founder, and CEO, Innovator ETFs. (ETF Trends)

Instead, they could consider an alternative investment strategy that could protect them from a loss shock up to a known buffer value on the one side, but also let them participate in the gains from a rally (up to a cap) on the other.

How it works

Starting with a synthetic 1:1 exposure to the index, the Innovator defined outcome ETF would be layered with a put spread to provide buffers of 9%, 15%, or 30% to the index. This layer would provide the downside buffers. On top of this, the ETF would sell an upside call to finance downside buffers. This last layer sets up the upside cap.

For illustration, in the Innovator S&P 500 Buffer ETF (BATS: BJAN), the ETF suffered only 80% of the S&P 500’s drawdown and experienced 77% of the benchmark’s volatility.

Advantages over other investments

According to Bond, who was participating in a webcast Buffer ETFs to Capitalize on Market Volatility, the Innovator defined outcome ETFs score over other investments as follows:

  • Bonds might not provide the downside buffer investors need with credit risk exposures
  • Hedge funds charge expensive fees, have underperformed the broad market, and require high minimums
  • Shorting the market involves high carry costs, no upside exposure, and trading skills to time the markets well

On the other hand, the Innovator defined outcome ETFs are suitable for risk-averse investors who seek:

  • no credit risk
  • intra-day liquidity
  • no surrender fees
  • access on an exchange
  • no commissions, and lower fees

Related Story:  These Hot New ETFs Protect Your Downside…And…Someone’s Taking Out A Patent on Them

Free Industry News

Subscribe to our free newsletter for updates and news about alternatives investments.

  • This field is for validation purposes and should be left unchanged.


Shape

Latest Alternative Investment News

https://dailyalts.com/wp-content/uploads/2023/12/AMD_headquarters_santa_clara.624da707519a6.jpg
Artificial Intelligence: AMD Takes On Rivals In The AI Chip Sweepstakes
December 7, 2023     Artificial Intelligence, News

Chipmaker AMD (NASDAQ: AMD) has unveiled a range of innovative AI solutions spanning from data centers to personal computers. The AMD Instinct MI300 Series features data center AI accelerators, while…

https://dailyalts.com/wp-content/uploads/2023/12/RHCEU-Inline.jpg
Digital Assets: Robinhood Debuts Crypto Trading On Its App In The EU
December 7, 2023     Digital Assets, FinTech, News

Robinhood (NASDAQ: HOOD) has launched its Crypto app in the European Union (EU), allowing eligible customers to engage in crypto trading with the added incentive of earning Bitcoin rewards. Customers…

https://dailyalts.com/wp-content/uploads/2023/12/Samsung_UK_Samsung_Pay_Lifestyle_0552-revised-Pictogram-23.11.30-1024x744-1.png
FinTech: Samsung Electronics Ties With Mastercard’s Wallet Express
December 7, 2023     FinTech, News

Samsung Electronics (KRX: 005930) and Mastercard (NYSE: MA) have partnered to launch the Wallet Express program, offering banks and card issuers a cost-effective way to expand digital wallet offerings. Through…

https://dailyalts.com/wp-content/uploads/2023/12/Revaia-founders.jpg
Venture Capital: Revaia, Europe’s Biggest Female-Led VC Firm, Racks Up $160M For Second Fund
December 7, 2023     ESG and Sustainability, News, Venture Capital

Revaia, Europe’s largest female-founded venture capital firm, has successfully raised €150 million ($160 million) for its second fund, Revaia Growth II. The funding was secured from sovereign wealth funds, family…