Enjoy a Smoother Ride in Equities With KSPY

KSPY seeks to track the Hedgeye Hedged Equity Index, providing exposure to the S&P 500. The strategy works to reduce volatility and hedge downside risk through its use of three different options strategies. Hedgeye manages the index and uses its proprietary risk management model that measures the trading range of the S&P 500 on a daily basis. Since the fund’s launch in July 2024, it has offered a smoother ride for S&P 500 investors.

While the strategy sacrifices some upside capture, it hedges against downside losses in equities. For example, when the S&P 500 — as measured by the SPDR S&P 500 ETF Trust (SPY A-) — declined 2.26% between October 29-31 last year, KSPY only fell 0.86% on a total return basis, according to Y-Charts data. When the Fed announced on December 18 it expected fewer rate cuts in 2025, SPY dropped 2.98%. Meanwhile KSPY’s strategy limited losses to 1.51%.

The fund uses call and put options on the S&P 500 Index and FLEX options that track the S&P 500 or similar indexes. Hedgeye’s proprietary Risk Range signals decide the options position within the fund. These signals measure volume, price, and volatility. From these, the strategy selects its options positions from one of three different strategies. These include Below, Within, and Above Risk Range Signals.

These positions change as often as daily, depending on market movement. This includes what calls and puts to use as well as the strike prices to use. The options roll once every three weeks, remaining dynamic and offering flexibility.

The strategy seeks to hedge downside risk while giving up some upside potential to do so. Premiums earned from selling options are used to fund the ETF’s options purchases. The premiums may also help compensate for some of the lost upside potential of KSPY while providing income.

The fund carries an expense ratio of 0.69% with a fee waiver that expires August 1, 2025.

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