NVBW provides a defined outcome strategy that protects against the first 20% of S&P 500 losses over a one-year period starting each November, while capping upside gains at a predetermined level set at the fund's annual reset.
How It Works
The fund uses a precise options strategy called a 'collar' — buying S&P 500 exposure while simultaneously purchasing protective puts 20% below the market and selling call options to fund that protection. Each November, the fund resets with new options positions, establishing fresh downside protection and a new upside cap based on prevailing market conditions and volatility levels.
Key Features
- 20% downside buffer refreshes annually each November with new protection levels
- Upside cap varies by vintage — typically 10-15% depending on market volatility at reset
- No credit risk unlike structured notes — uses exchange-traded options only
Risks
- Losses beyond 20% hit dollar-for-dollar — 30% market drop means 10% fund loss
- Missing rallies above the cap can be costly — no participation in gains beyond ~12-15%
- Mid-period buyers get partial protection — entering in May means only ~10% buffer remains
Who Should Own This
Best for nervous equity investors who can stomach missing some upside to sleep better at night, particularly those nearing retirement who want market exposure but can't afford another 2008-style drawdown. Works as a 10-20% portfolio sleeve for reducing volatility without going to cash or bonds.