MMAY provides downside protection with upside participation through a structured outcome strategy that resets each May. The fund aims to buffer against the first 15% of S&P 500 losses while capping gains at a predetermined level over each annual outcome period.
How It Works
The fund uses FLEX options on the S&P 500 to create defined outcome exposures that reset annually in May. It sells upside call spreads to fund downside put spreads, creating a buffer against moderate losses while limiting maximum gains. The exact cap and buffer levels are set at each May reset based on prevailing option prices and market conditions.
Key Features
- 15% downside buffer protects against moderate market declines within each outcome period
- Pre-defined upside cap typically ranges 8-12% depending on volatility at reset
- May reset timing allows investors to plan around known outcome periods
Risks
- Losses beyond 15% are unprotected - a 25% market drop means you lose 10%
- Upside cap means missing gains in strong rallies - painful in bull markets
- Mid-period entries get partial buffer/cap based on remaining time and market level
Who Should Own This
Best for conservative investors approaching retirement who want equity exposure but can't stomach a 2008-style drawdown. Works well as a 10-20% portfolio sleeve for those willing to trade away bull market gains for bear market protection. Not suitable for investors who need liquidity before the outcome period ends.