AUGM delivers S&P 500 returns with a twist: it completely shields you from the first 10% of losses over a one-year period starting each August, but caps your upside at around 15-20%. Think of it as portfolio insurance that you pay for by giving up your home runs.
How It Works
The fund uses a precise options collar strategy, buying S&P 500 exposure while simultaneously purchasing protective puts 10% out-of-the-money and selling call options to fund the protection. Each August, the fund resets with new options positions, establishing fresh buffer and cap levels based on market conditions. Between reset dates, the effective buffer and cap fluctuate with the market — if you buy mid-cycle, your actual protection and upside limits differ from the stated levels.
Key Features
- Complete protection against the first 10% of S&P 500 losses from each August reset date
- Upside participation capped at roughly 15-20% annually, set at each August reset
- No credit risk since it uses exchange-traded options, not structured notes
Risks
- Losses beyond 10% hit you dollar-for-dollar — a 25% crash means you're down 15%
- Missing all gains above the cap can devastate long-term returns in bull markets
- Mid-period buyers face complex math — your actual buffer might be 3% if markets have already fallen 7%
Who Should Own This
Perfect for retirees or pre-retirees who can't stomach another 2008 but still need equity exposure for inflation protection. Also works for advisors managing nervous clients who might otherwise panic-sell during corrections. If you're under 50 or have a 10+ year horizon, the capped upside will likely cost you more than any temporary downturns you avoid.