PMDE delivers S&P 500 exposure with a twist: it uses options to eliminate the first 10-15% of losses over a one-year period starting each December, but caps your upside at a predetermined level (typically 15-20% depending on market conditions when the fund resets).
How It Works
The fund holds a ladder of S&P 500 options that reset annually each December. It buys puts to create the downside buffer and sells calls to fund that protection, creating a defined range of outcomes. The exact cap and buffer levels are set at each annual reset based on option prices, with investors who buy mid-period getting pro-rated protection based on the fund's current NAV.
Key Features
- Complete protection against the first 10-15% of S&P 500 losses from December to December
- Known maximum return potential set at the start of each outcome period, typically 15-20%
- Options reset annually in December, providing fresh protection and new upside cap each year
Risks
- Losses beyond the buffer hit dollar-for-dollar — a 25% S&P decline means you lose 10-15%
- Missing all gains above the cap — if S&P rises 30%, you only get the capped return
- Mid-period buyers get different economics — buying in June means partial buffer and lower remaining cap
Who Should Own This
Best for investors who want equity exposure but can't stomach normal volatility — think retirees or those within 5 years of retirement who need growth but would panic-sell in a 20% drawdown. Also works as a defensive equity sleeve for advisors managing nervous clients. Not for long-term accumulators who can ride out volatility.