MAYW provides one-year downside protection against the first 20% of S&P 500 losses 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 meaningful downside cushion.
How It Works
The fund uses a options collar strategy, buying S&P 500 exposure while simultaneously purchasing protective puts 20% below the market and selling call options to fund the protection. The outcome period resets annually each May, with new caps and buffers established based on prevailing market conditions. Between reset dates, the buffer and cap levels float with the market, meaning mid-period buyers get different protection levels than those who buy at inception.
Key Features
- 20% downside buffer protects against significant market drops, more generous than typical 10-15% buffer ETFs
- Annual May reset provides predictable entry point for investors seeking fresh protection cycles
- Options-based structure delivers defined outcomes without the credit risk of structured notes
Risks
- Upside cap (typically 10-15% annually) means you'll miss out on strong bull market gains beyond the threshold
- Losses beyond 20% hit dollar-for-dollar — a 30% market drop still means 10% loss for the fund
- Mid-period purchases get partial buffer protection; buying after market rises reduces downside cushion
Who Should Own This
Best suited for pre-retirees or conservative investors who fear a market correction but don't want to sit in cash. Works well as a defensive equity sleeve (10-20% of stock allocation) for those willing to sacrifice bull market participation for bear market protection. Timing matters — most effective when purchased at the May reset date.