The new Calamos ETF promises ‘100% downside protection’. How it works

A new ETF designed to protect investors from the risk of market volatility begins trading Wednesday

The Calamos S&P 500 Structured Alt Protection ETF (CPSM) promises to provide investors with “100% downside protection” against the index’s losses over a one-year outcome period, according to the company’s press release.

Matt Kaufman, head of Calamos’ ETFs, helped develop the new product.

“There are no tricks. There is no magic,” he told CNBC’s “ETF Edge” on Monday. “This is the secret sauce.”

Kaufman explained that the new ETF takes three options positions. Investors in the fund are subject to restrictions on the extent to which they can utilize gains associated with the S&P500.

“They all work together. It’s a fully funded options package that delivers the S&P 500 upside up to a maximum with 100% capital protection over a 365-day outcome period.”a he said.a “At the end of that year the options reset, stay in the ETF and move on.”

The fund will have an annual expense ratio of 0.69%.

To get the full downside protection against losses in the S&P 500 that the fund promises, Kaufman noted that investors should buy it on Wednesday when it hits the market.

“If you make a purchase on day one, you get 100% protection,” he said. “[But] even day two [or] On day three, there will likely be purchasing opportunities along the way.”

The fund is just one of 12 structured protection ETFs that the company plans to launch over the course of next year. Upcoming funds include funds aimed at protecting against losses associated with the Nasdaq100 And Russell 2000 benchmarks

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