MAYT provides a buffer against the first 10% of S&P 500 losses over a one-year period starting each May, while capping upside gains at a predetermined level. It's designed for investors who want equity exposure but are willing to trade away some upside for downside protection.
How It Works
The fund uses a options package (typically buying and selling SPX calls and puts) to create a defined outcome profile that resets annually each May. The exact cap level varies based on market conditions at reset but typically ranges from 12-18% above the starting level. Between reset dates, the buffer and cap levels move dynamically based on how far the market has already moved.
Key Features
- Protects against first 10% of losses from May reset date, but losses beyond 10% hit dollar-for-dollar
- Cap level set at inception each May based on options pricing - check current cap before buying mid-period
- No dividend payments as options strategy doesn't capture S&P 500 dividends, reducing total return by ~2% annually
Risks
- Buying mid-period means inheriting a different risk/reward profile - could have minimal buffer left if market already down 9%
- Missing dividends plus expense ratio creates ~2.7% annual performance drag versus holding SPY directly
- If S&P 500 drops more than 10%, you eat all additional losses - this isn't a hedge for major crashes
Who Should Own This
Best for investors approaching retirement or with specific one-year liquidity needs who can stomach missing some upside to avoid moderate losses. Works as a defensive equity sleeve for nervous investors, not as a core holding. Timing matters enormously - buying at the May reset gives you the full buffer, while mid-period purchases require checking remaining protection.