Two new exchange-traded funds issued by Global X have been tradable on Xetra and via the trading venue Börse Frankfurt since Thursday.
The new ETFs from Global X S&P 500 Quarterly Buffer and Tail Hedge track the performance of companies from the S&P 500 Index and use put options to hedge downside risks up to a certain level. The hedging strategy against losses has the side effect that the upside returns of the ETFs are limited by a cap.
The buffer strategy applied here is composed of a protection and a cap component. The protection component is achieved by simultaneously purchasing a put option (at-the-money) and selling a put option (out-the-money). The net costs resulting from these two transactions are covered by writing a call option. The exercise price of the call option defines the level of the cap and thus the profit opportunities. The closer the price of the S&P 500 Index approaches the execution price of the call option, the lower the profit opportunities (cap component). The level of the cap is updated on the Global X website.
The Global X S&P 500 Quarterly Buffer UCITS ETF limits downsides up to approximately 5 per cent. The Global X S&P 500 Quarterly Tail Hedge UCITS ETF protects investors from a downside of 3 per cent and up to 12 per cent. The buffer is therefore 9 per cent. The positive returns are limited to a maximum of 15 per cent in each case. The buffer strategy is reset on a quarterly basis.
|Name||Asset class||ISIN||On-going charges||Distribution policy||Reference index|
|Global X S&P 500 Quarterly Buffer UCITS ETF – USD Accumulating||Equity-ETF||IE000LSRKCB4||0.45 per cent||accumulating||CBOE S&P 500 15% WHT Quarterly 5% Buffer Protect Index|
|Global X S&P 500 Quarterly Tail Hedge UCITS ETF – USD Accumulating||Equity-ETF||IE000EPX8KB7||0.45 per cent||accumulating||CBOE S&P 500 15% WHT Quarterly 9% (-3% to -12%) Buffer Protect Index|
The product offering in Deutsche Börse’s XTF segment currently comprises a total of 2,021 ETFs. With this selection and an average monthly trading volume of around €19 billion, Xetra is the leading trading venue for ETFs in Europe.