Stocks rose in early trading to kick off a busy week of earnings, with quarterly reports from big banks, including Charles Schwab, Bank of America, and Goldman Sachs, on the docket for today. Later in the week, healthcare giants Johnson & Johnson and Novartis will report along with highly anticipated releases from Netflix and Tesla. Morgan Stanley and JPMorgan Chase started the season last week, posting mixed quarterly results.
According to FactSet S&P, 500 companies are expected to post a 4.2% increase in second-quarter profits and a 10.2% increase in revenue. Full-year profit expectations are also still high, with S&P 500 companies expected to post a 9.9% earnings increase for 2022, despite growing recession fears.
Many on Wall Street believe markets will likely remain volatile in the coming months as investor sentiment fluctuates between hopes and fears of economic growth and inflation. Today we’ll highlight an investment that provides large cap exposure with a twist. It also allows investors to benefit from extreme shifts in market sentiment.
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One of the first ETFs to launch from Simplify, The Simplify US Equity PLUS Downside Convexity ETF (SPD) seeks to provide capital appreciation by offering US large cap exposure while aiming to boost performance during extreme market moves down via a systematic options overlay. The actively managed fund’s core holding gives investors low-cost, index-based exposure to US large caps. A modest option overlay budget is then deployed into a series of options positions that help create downside convexity in the fund.
Under normal circumstances, it invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of US companies, primarily by purchasing ETFs. The downside convexity option overlay consists of purchasing exchange-traded and over-the-counter put options on the S&P 500 Index or an S&P 500 Index ETF.
The option strategy is designed to provide downside protection without capping any upside participation, which creates downside convexity in the fund. The specific put option contracts are selected strategically based on the adviser’s evaluation of relative value, strike price, and maturity. Investors should anticipate a non-linear relationship between the funds and market returns.
SPD is useful as a short-term tool and also as a longer-term portfolio component. Its performance YTD has been similar to the S&P 500. The fund is cheap relative to peers, with an expense ratio of just 0.28%.
Where to invest $1,000 right now...
Before you consider buying SPD, you'll want to see this.
Investing legend, Keith Kohl just revealed his #1 stock for 2022...
And it's not SPD.
Jeff Bezos, Peter Thiel, and the Rockefellers are betting a colossal nine figures on this tiny company that trades publicly for $5.
Keith say’s he thinks investors will be able to turn a small $50 stake into $150,000.
Find that to be extraordinary?
But you have to act now, because a catalyst coming in a few weeks is set to take this company mainstream... And by then, it could be too late.
Banyan Hill Publishing:
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New technology’s user base growing at 5X the speed of the internet in the 1990s. Could dwarf dot-com boom. [Click here to get details on $2 stock now.]