DGAP provides partial downside protection against S&P 500 losses while offering upside participation to a cap, plus a separate digital payout if the market stays above a trigger level. Think of it as insurance that pays you twice — once for surviving and once for thriving.
How It Works
The fund uses a FLEX options package to create a 12-month outcome period starting each April. It buffers the first 10% of S&P 500 losses while capping gains around 15-20%. The twist: if the S&P 500 finishes above its starting value, investors get an additional fixed digital payout (typically 5-8%) on top of their capped appreciation.
Key Features
- Dual payout structure combines traditional buffer protection with binary digital return component
- 10% downside buffer shields against moderate corrections while maintaining meaningful upside
- Annual reset each April with new cap levels and digital payout terms published at inception
Risks
- Losses beyond 10% buffer hit dollar-for-dollar — a 25% market drop means you lose 15%
- Digital payout is all-or-nothing: S&P 500 down 0.01% means you miss the entire bonus payment
- Mid-period buyers face asymmetric risk as protection and cap levels reflect remaining time, not entry price
Who Should Own This
Best for investors approaching retirement who want equity exposure but can't stomach another 2008-style drawdown. The digital payout sweetens the deal for those willing to cap their upside. Hold for the full outcome period — trading these mid-cycle is like buying half a lottery ticket.