HMAY provides 100% downside protection against S&P 500 losses over a one-year period starting each May, in exchange for capping upside gains. Think of it as equity exposure with training wheels — you can't lose money, but you also can't hit home runs.
How It Works
The fund uses a options collar strategy, buying S&P 500 exposure while simultaneously purchasing put options for full downside protection and selling call options to fund that protection. The buffer resets annually each May, with new caps set based on prevailing volatility and interest rates. Between reset dates, the fund's protection level and cap drift based on market movements and time decay.
Key Features
- Complete downside protection — genuinely can't lose money if held for the full outcome period
- Upside cap typically ranges 5-15% annually depending on market volatility when the fund resets
- May series timing aligns with 'sell in May' seasonality for nervous investors
Risks
- Missing significant upside — in a 30% rally year, you might only capture 10% due to the cap
- Buying mid-period means inheriting a partially depleted buffer and lower remaining cap potential
- Zero yield — unlike bonds, you get no income while waiting for appreciation
Who Should Own This
Perfect for retirees or conservative investors who need equity exposure but absolutely cannot tolerate losses over the next year. Also works for parking cash you'll need in 12-18 months where you want upside potential beyond money markets. Terrible choice for anyone under 50 or with a multi-year horizon — you're paying too much in opportunity cost for protection you don't need.