OCTT provides a buffer against the first 10% of S&P 500 losses over a one-year period starting each October, while capping upside gains at a predetermined level. Think of it as equity exposure with training wheels — you give up some upside to avoid moderate downturns.
How It Works
The fund uses a options collar strategy, buying S&P 500 exposure while simultaneously purchasing put spreads for downside protection and selling call options to fund that protection. Each October, the fund resets with new options positions, establishing fresh buffer and cap levels based on prevailing market conditions. Between reset dates, the buffer and remaining upside change daily as the market moves.
Key Features
- 10% downside buffer refreshes annually each October with new cap levels
- No expense ratio — options strategy costs are embedded in the cap/buffer structure
- Provides known outcomes if held for full period, unlike traditional hedged equity strategies
Risks
- Losses beyond 10% are unprotected — a 25% market drop means you lose 15%
- Upside caps can be restrictive in bull markets, potentially limiting gains to single digits
- Mid-period buyers face asymmetric risk — less buffer remaining but full downside exposure below it
Who Should Own This
Best suited for nervous equity investors approaching retirement who can stomach missing some upside but really can't afford a 2008-style drawdown. Works well for someone who wants S&P 500 exposure but would otherwise hold too much cash out of fear. The October reset makes it natural for year-end portfolio reviews.