Samsung’s First ‘Buffer ETF’ in Asia Losses Capped at 16.4%
- Based on the S&P 500 Index at 5650, the ETF aims for 0% loss even if the index falls to 5075 by March next year, with a potential...
- Amid increasing global stock market volatility, a buffer-type exchange-traded fund (ETF) is now available on the South Korean stock market.
- Samsung Asset Management announced the listing of the 'KODEX US S&P 500 Buffer March Active' ETF on March 25.
‘KODEX US S&P 500 Buffer March active’ ETF Launches
Table of Contents
- ‘KODEX US S&P 500 Buffer March active’ ETF Launches
- ‘KODEX US S&P 500 Buffer March Active’ ETF: Your Questions Answered
- What is a Buffer ETF?
- How Does the ‘KODEX US S&P 500 Buffer march Active’ ETF Work?
- What is the S&P 500 10% Buffer Index Series?
- What are the Potential Returns and Risks?
- Who Should Consider Investing in This ETF?
- Key Features Summarized
- Where can I Find More Details About the ETF?
- is This the First Buffer ETF?
Based on the S&P 500 Index at 5650, the ETF aims for 0% loss even if the index falls to 5075 by March next year, with a potential increase to 6575.
Amid increasing global stock market volatility, a buffer-type
exchange-traded fund (ETF) is now available on the South Korean stock market. This ETF is designed to absorb up to 10% of potential losses while pursuing a 16% revenue (in U.S. dollars).
Samsung Asset Management announced the listing of the ‘KODEX US S&P 500 Buffer March Active’ ETF on March 25. The ETF invests in the U.S. Standard & Poor’s 500 index, utilizing options to mitigate declines by approximately 10% by the end of the outcome period. S&P Dow jones Indices will use the S&P 500 10% Buffer Index Series
, announced in September 2024, as a benchmark.
The ETF establishes a one-year maturity buffer
against potential S&P 500 index declines. Annually, from March to the following March, the buffer is constructed by purchasing a one-year maturity option, providing a buffer of approximately -10% (dollar basis). The upside is capped to offset the cost of establishing the buffer. According to samsung Asset Management, the cap is set at 16.4%. As options are reinvested annually after liquidation, the cap level fluctuates each March based on associated costs.
As of approximately 2 p.m. on March 21 (U.S. Eastern time), the buffer was set at 5650, the market average price of the S&P 500 index, with the buffer floor at -10.2%. The call option premium, designed to cover the cost of purchasing put options, was set at 6575 (a cap of 16.4%).
This ETF might potentially be suitable for investors anticipating the S&P 500 Index to fluctuate between 5075 and 6575 by March 20,2026. Even if the S&P 500 Index falls to 5075, losses will be buffered to 0% (based on the U.S. dollar) at the end of the outcome period. If the index rises, profits can be realized up to an S&P 500 Index value of 6575. This represents a potential increase of approximately 7% above the previous high of 6147.43. Though, as an exposure-type product, the final return may vary due to fluctuations in the won-dollar exchange rate.
While the buffer ETF’s revenue structure is set for one year, it can be sold at any time due to its ETF characteristics. However, the value of the option varies depending on the timing, possibly affecting the profit structure based on purchase and sale points.Samsung Asset Management plans to provide guidance on key indicators,such as the cumulative profit of the buffer ETF,the remaining ETF cap,and the remaining buffer achievable by the end date,on the KODEX homepage.
According to Lim Tae-hyuk, head of ETF Management Division, Samsung Asset Management is introducing the first buffer ETF to South Korea, a strategy that has grown to approximately 90 trillion won in the United States. Samsung Asset Management offers a range of S&P 500-related etfs, including those focused on the broader S&P 500, strategies to mitigate won-dollar exchange rate drops, and sector-specific investments.
‘KODEX US S&P 500 Buffer March Active’ ETF: Your Questions Answered
Are you looking to navigate the stock market’s volatility with more confidence? The ‘KODEX US S&P 500 Buffer March Active’ ETF, launched on March 25, might be a suitable option. This article addresses key questions about this innovative investment tool.
What is a Buffer ETF?
A buffer-type Exchange Traded fund (ETF) is designed to protect investors against market downturns while still providing the opportunity for gains. The ‘KODEX US S&P 500 Buffer March Active’ ETF, for example, aims to absorb up to 10% of potential losses.
How Does the ‘KODEX US S&P 500 Buffer march Active’ ETF Work?
This ETF invests in the U.S. Standard & Poor’s 500 index and uses options to manage risk and potential returns. The buffer is constructed annually, from March to the following March, by purchasing a one-year maturity option.
- buffer: Provides approximately a -10% buffer against declines.
- Upside Cap: Limits potential gains. The cap is set to offset the cost of the buffer. for this specific ETF, the cap is set at 16.4%.
- One-Year Outcome Period: The ETF’s performance is measured over a one-year period.
What is the S&P 500 10% Buffer Index Series?
The S&P 500 10% Buffer Index Series, announced in September 2024, serves as a benchmark for this ETF. This index helps to measure the performance of the ETF’s strategy.
What are the Potential Returns and Risks?
The ‘KODEX US S&P 500 Buffer March Active’ ETF is designed to offer a combination of downside protection and upside potential. As of March 21, with the S&P 500 index at 5650, the ETF aims for:
- Buffer against Loss: A buffer floor of -10.2%, meaning losses would be buffered to 0% by the end of the outcome period if the index falls to 5075.
- Upside Potential: Profits can be realized up to an S&P 500 Index value of 6575, representing a potential increase of 16.4%.
Significant Note: Final returns may vary due to fluctuations in the won-dollar exchange rate.
Who Should Consider Investing in This ETF?
This ETF may be suitable for investors anticipating fluctuations in the S&P 500 Index between 5075 and 6575 within a one-year period (March to March). Given that the ETF aims for 0% loss even if the index falls to 5075 by March next year, with a potential increase to 6575, it can be used for investors looking for a more conservative approach in volatile markets.
Key Features Summarized
Here’s a summary table to highlight essential details:
| Feature | description |
|---|---|
| Name | KODEX US S&P 500 buffer March Active |
| Benchmark | S&P 500 10% Buffer Index Series |
| Launch Date | March 25 |
| Buffer | Approximately -10% |
| Potential Upside | Capped at 16.4% |
| Outcome Period | One Year (March to March) |
Where can I Find More Details About the ETF?
Samsung Asset Management plans to provide key information, such as the cumulative profit, remaining cap, and remaining buffer on the KODEX homepage.
is This the First Buffer ETF?
While this is the first buffer ETF introduced by Samsung asset Management in South Korea, these types of strategies have gained significant traction, with approximately 90 trillion won in the United States.