Calamos Structured Protection ETFs

[Ncc1701]

I know we've all seen structured products before but this is the first I've seen with 100% downside protection and a reasonable fee (69 bps). So from what I gather, the most you can lose is .69% and the most you can make is 8.50% based on the first offering (CPSM). Any thoughts on this? I'm thinking of substituting these for some of my CD and Wellesley Income holdings. Thanks for your input.

Link to website: Structured Protection ETFs

 

[pb4uski]

If they can really limit downside risk then why not just borrow a boatload of money, trade on your own account and get rich from trading? I'm skeptical.

 

[OldShooter]

Interesting that they make the prospectus difficult to review: " ... Before investing, carefully consider the fund's investment objectives, risks, charges and expenses. Please see the prospectus and summary prospectus containing this and other information which can be obtained by calling 1-866-363-9219. ... "

I note too that the "Reference Asset" is the price return of the index, not the total return. They are keeping the dividends for themselves. Typical huckster behavior.

If it sounds too good to be true ...

 

[pb4uski]

Dumb question on the rate sheet.... if the downside protection is 0% why does it say in the low left corner... MAY LOSE VALUE?

 

[copyright1997reloaded]

If they can really limit downside risk then why not just borrow a boatload of money, trade on your own account and get rich from trading? I'm skeptical.

Because a) expense ratio of .69, loss of 1.9% SPY yield, loss of appreciation above cap (9.81% max for the May 24 issue). Also some non-zero theoretical loss due to counter party risk (would likely require a massive downturn as they are likely using options and other derivative products).

Assuming the long term SPY compound growth of 8% and that a decent % of the years will be negative (meaning the up years would have to be higher than 8% on average), a lot of the potential gain is lost. For example, if (just making numbers up here), one of four years is negative, and all of these end up with the same cap (they won't), one would get 9.1*3/4 (9.8 minus expenses) resulting in a 6.825 compound growth rate. If 2 of 5 years are negative, 5.46%.

So one gives up a decent slug of that "long term" market growth. Might be good for risk adverse (e.g. insurance companies, pensions) but they would likely take your advice and trade on their own account (i.e. do the derivatives directly).

 

[I am He]

He was just on this podcast: Animal Spirits Podcast: Talk Your Book: Defining Risk with Structured Protection ETFs on Apple Podcasts. He mentioned the interest rates are high enough to make it (a buffered ETF) work.

 

[rayvt]

I have looked at enough of these products to predict that there are huge gotchas in there. Unlikely a mere mortal will find them all. For one, there are dozens of ways they can use to compute the upside cap.

Oooh, from the prospectus:
"The Cap is expected to change at the beginning of each new Outcome Period."
"There is no guarantee the Fund will be successful in providing the sought-after downside protection."

 

[CRLLS]

I know we've all seen structured products before but this is the first I've seen with 100% downside protection and a reasonable fee (69 bps). So from what I gather, the most you can lose is .69% and the most you can make is 8.50% based on the first offering (CPSM). Any thoughts on this? I'm thinking of substituting these for some of my CD and Wellesley Income holdings. Thanks for your input.

Link to website: Structured Protection ETFs

It is now after the start date. If I understand it correctly, the most you can lose for CPSM is the fee, 0.69% plus the 1.22% (before the protection starts). That is almost 2% with a max possible of 8.45% minus the 0.69%

 

[BlueberryPie]

Look at the fine print and you will find out that you will never make the max. Look up indexed annuities, racheting annuities, this is basically the sam thing under a different name, and all the ways they get you because of what your thought you heard vs reality.
Stay away, too good to be true!

 

[ychuck46]

"There is no guarantee the Fund will be successful in providing the sought-after downside protection."

Bingo. The caveats on this product make it not worth the effort. I can almost guarantee any investor will be better off putting the same amount of money into a combo of an S&P500 ETF and either a Total Bond ETF or Treasuries. The only people making good money off this Calamos offering will be the fund managers.

 

[Ncc1701]

It is now after the start date. If I understand it correctly, the most you can lose for CPSM is the fee, 0.69% plus the 1.22% (before the protection starts). That is almost 2% with a max possible of 8.45% minus the 0.69%

Correct. They just updated the rate sheet to reflect what you stated. If you purchased it on the offering date at $25, the worst case scenario would be a loss of .69% and if the S&P rises over the next year, you would get the first 9% of return. Its seems pretty simple to me and for conservatively earmarked assets, doesn't seem like such a bad deal.

 

[rayvt]

Correct. They just updated the rate sheet to reflect what you stated. If you purchased it on the offering date at $25, the worst case scenario would be a loss of .69% and if the S&P rises over the next year, you would get the first 9% of return. Its seems pretty simple to me and for conservatively earmarked assets, doesn't seem like such a bad deal.

What you won't get is the 1.34% dividend.

 

[DJRR]

I am sure with a combination of zero expense index funds and options that you could create such a collar for a much lower cost. Back in the MBA days we used to do these type of "snythetic" securities on a regular basis. Maybe it is too much work for you, but really no magic if you are willing to give up the upside.