CMAY provides partial downside protection against S&P 500 losses while capping upside gains over a one-year period starting each May. It's designed for investors who want equity exposure but are willing to trade away some upside for a 15% cushion against market drops.
How It Works
The fund uses a options collar strategy, buying S&P 500 exposure while simultaneously purchasing put options for downside protection and selling call options to fund that protection. The 15% buffer absorbs the first 15% of losses, but investors eat everything beyond that. The upside cap resets annually and varies based on market conditions at each May reset date.
Key Features
- Absorbs first 15% of S&P 500 losses over each outcome period
- Upside capped at levels set each May based on options pricing
- Daily liquidity despite one-year outcome periods
Risks
- Losses beyond 15% hit dollar-for-dollar - a 40% crash means you lose 25%
- Missing rallies hurts - if S&P gains 30% and your cap is 12%, you leave 18% on the table
- Buying mid-period means inheriting someone else's buffer/cap arrangement at current levels
Who Should Own This
Best for nervous equity investors approaching retirement who can stomach missing some upside but really need to avoid the first chunk of a downturn. Works as a defensive equity sleeve for those who otherwise might flee to cash. Not for long-term growth seekers or anyone who'd kick themselves for missing a big rally.